YOUR RETIREMENT INCOME PLANNING
YOUR RETIREMENT INCOME PLANNING
Prepared for
EXPLORE
PRODUCTS THAT CAN HELP YOU
PREPARE FOR YOUR FINANCIAL
FUTURE
This brochure is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal
or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please
note that this agency and its representatives do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
TABLE OF CONTENTS
Executive summary 2
#1: Plan for a long life 3
#2: Health care expenses may increase 4
#3: You may need a housing plan (or two) 5
#4: Plan for long-term care assistance 7
#5: Consider the potential impact of inflation 8
#6: Regularly evaluate your goals 10
#7: Social Security benefits 12
#8: Taxes in retirement 14
#9: Distribution strategies 16
#10: The role of financial products
in retirement 17
Conclusion 21
This brochure is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal
or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please
note that this agency and its representatives do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
EXECUTIVE SUMMARY
Historically, the United States had three strong legs of the retirement
stool: a well-funded Social Security system, substantial corporate
pensions with retiree health benefits and, ideally, a strong personal
savings rate. Now, the responsibility for providing retirement income
is largely up to individuals. Because defined contribution plans are
more common today, individuals have a greater responsibility for
saving for their own retirement. The booming population now coming
of retirement age faces additional challenges when it comes to
creating a retirement income to support their desired lifestyle.
State and local government pension plans are typically underfunded,
cutting back on benefits and raising employee contributions.
1
In the
private sector, less than one-fifth of today’s Fortune 500 companies
offer any type of defined benefit (DB) plan to newly hired salaried
workers; only 24 still offer a traditional DB plan to new hires.
2
Furthermore, due to the availability of new health insurance plans on
the health care market exchanges for Medicare-eligible retirees, the
percentage of large employers (200+ workers) that offer retiree health
coverage is down to 23 percent for 2015, a decrease of more than 40
percent since 1988.
3
Instead of defined benefit plans, it is more common to have an
employer-sponsored, defined contribution plan such as a 401(k),
403(b) or 457 plan. These plans are an excellent way to save, but we
are only now witnessing the first wave of “401(k) retirees” who will
live off of this type of savings. It remains to be seen whether these
defined contribution plans will meet the retirement savings needs for
anticipated longer lifespans.
There are many variables involved in creating a retirement income
strategy for today’s retirees. What follows are 10 things to consider
when working with a financial professional to develop a retirement
income strategy.
1
Wayne Windegarden. May 26, 2017. “Pensions: The Case for Defined Contribution Retirement Plans.” https://efficientgov.com/
blog/2017/05/26/pensions-defined-contribution-retirement-plans/. Accessed Aug. 7, 2017.
2
Brendan McFarland. Feb. 18, 2016. “A Continuing Shift in Retirement Offerings in the Fortune 500.” https://www.towerswatson.com/en-US/
Insights/Newsletters/Americas/insider/2016/02/a-continuing-shift-in-retirement-offerings-in-the-fortune-500. Accessed Aug. 7, 2017
3
Tricia Neuman. May 5, 2016. “Fading Fast: Fewer Seniors Have Retiree Health Insurance.” https://www.kff.org/medicare/issue-brief/fading-
fast-fewer-seniors-have-retiree-health-insurance/. Accessed Aug. 7, 2017.
2
YOUR RETIREMENT INCOME PLANNING CHECKLIST
This brochure is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal
or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please
note that this agency and its representatives do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
In 1940, when monthly retirement benefits started through the Social Security Act, 65-year-old
beneficiaries received payouts for an average of 12 to 15 years.
4
Now, however, a 65-year-old
can expect to live, on average, until age 85, but about one out of every four retirees will live
past age 90 — which can mean providing for 20 years or more of income once you qualify for
Social Security benefits.
5
Furthermore, Social Security is not intended to be a retiree’s sole form
of income.
Average Life Expectancies Through the Ages
Those longevity statistics are quoted as averages for both men and women, but keep in mind
that men weigh the average down because women in modern times outlive men by about five
years.6 Researchers also have found that marriage has a positive impact on mortality. People
who never married were more than twice as likely to die early than those who had been in a
stable marriage throughout their adult life.
7
4
SocialSecurity.gov. “Life Expectancy for Social Security.” http://www.socialsecurity.gov/history/lifeexpect.html.
Accessed Aug. 9, 2017.
5
SocialSecurity.gov. 2017. “Calculators: Life Expectancy.” https://www.ssa.gov/planners/lifeexpectancy.html. Accessed Aug. 8, 2017.
6
Centers for Disease Control and Prevention. December 2016. “Mortality in the United States, 2015.” https://www.cdc.gov/nchs/products/
databriefs/db267.htm. Accessed Aug. 8, 2017.
7
Dr. Ilene Siegler and colleagues from Duke University Medical Center. Springer Select. Jan. 10, 2013. “Marriage linked to better survival in
middle age.” http://www.springer.com/about+springer/media/springer+select?SGWID=0-11001-6-1401342-0. Accessed Aug. 15, 2017.
3
#
1
PLAN FOR A
LONG LIFE
YOUR RETIREMENT INCOME PLANNING CHECKLIST
This brochure is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal
or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please
note that this agency and its representatives do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
Just because we are living longer doesn’t mean we’re going to be healthy throughout our longer
lives. In fact, 45 percent of U.S. adults report that they live with one or more chronic conditions.
8
While some credit goes to more active, health-conscious, smoke-free lifestyles, it may be safe to
say that today’s retirees owe more to prescription drugs and medical advances for lengthening
their lifespans. And as we all know, health care can be expensive. In fact, a healthy 65-year-old
couple retiring in 2017 are projected to need $321,994 for lifetime health care premiums alone.
This number doesn’t account for costs of prescription drugs, office visits or nursing home care.
9
In a 2017 survey, 45 percent of individuals reported that they were either not at all confident or not
too confident about having enough money to take care of medical expenses in retirement.
10
This
can be a key component of your overall retirement strategy, as health care costs can represent a
significant portion of a retiree’s expenses. When creating a retirement income strategy, it’s important
to consider that a couple’s retirement assets may be diminished by the health care costs for the
spouse who dies first. While you may end up spending less on things like travel and entertainment
than when you first retire, be advised that medical and long-term care in your later years may require
more income.
Another expense to consider is how inflation will affect your health care expenses. Retirement
health care is expected to rise at an average annual amount of almost 6 percent.
11
8
Centers for Disease Control and Prevention. “Chronic Disease Overview.” https://www.cdc.gov/chronicdisease/overview/index.htm. Accessed
Aug. 8, 2017.
9
Health View Services. “2017 Retirement Health Care Costs Data Report.” Accessed Aug. 8, 2017.
10
Lisa Greenwald, Craig Copeland and Jack VanDerhei. March 21, 2017. “The 2017 Retirement Confidence Survey: Many Workers Lack
Retirement Confidence and Feel Stressed About Retirement Preparations.” https://www.ebri.org/pdf/surveys/rcs/2017/IB.431.Mar17.
RCS17..21Mar17.pdf. Accessed Aug. 8, 2017.
11
Marlene Satter. June 14, 2017. “Health care costs in retirement projected to soar.” http://www.benefitspro.com/2017/06/14/health-care-
costs-in-retirement-projected-to-soar. Accessed Aug. 8, 2017.
4
HEALTH CARE EXPENSES
MAY INCREASE
#
2
YOUR RETIREMENT INCOME PLANNING CHECKLIST
This brochure is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal
or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please
note that this agency and its representatives do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
5
YOU MAY NEED A
HOUSING PLAN
(OR TWO)
If the volatile nature of the home equity market tells us anything, it’s that placing too much
of your net worth in your home could impact your retirement income.
Your home may not provide the backup retirement income you anticipate. Or perhaps
you’ve considered relocation to a senior community but have delayed that move to sell your
home when prices recover.
In today’s environment, taking on a modest mortgage and paying it off before retirement is the
goal. At that time, and based on individual situations, you may have the option to downsize
your residence or use the equity to help fund your retirement income via a reverse mortgage.
You can also stay in your home until you pass away and let its equity serve as an inheritance
for your beneficiaries.
#
3
YOUR RETIREMENT INCOME PLANNING CHECKLIST
This brochure is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal
or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please
note that this agency and its representatives do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
6
Housing Away From Home
Plenty of elderly individuals who live independently in their own homes may
do so indefinitely. But realistically, you should be prepared with a backup
plan. If you’ve ever been laid up for a significant amount of time due to
injury or illness, you probably know what it’s like to need assistance. As we
age, it can take even longer to recover, and even acute health conditions
may require additional home health assistance for recovery.
In-home professional health services offer a variety of fee-based options
provided by home health aides, in-home physical or occupational therapists,
nutritionists and nurses, but these services can be quite costly. The cost
of home care combined with other living expenses, such as a mortgage
or rent, utilities, groceries and transportation, can be expensive and is
important to consider.
Senior living communities run the gamut of care from independent living
to assisted living, rehabilitative care, memory care and complete 24-hour
skilled nursing long-term care. The cost of facilities varies and should be
considered when planning a retirement strategy. Consider the possibility
that one spouse may have medical issues requiring full-time nursing care
while the other spouse continues to live in the family home. A split housing
scenario may impact retirement savings.
It’s good to have a contingency plan in place to help ensure that such a
change in your housing situation doesn’t drain your income resources.
YOUR RETIREMENT INCOME PLANNING CHECKLIST
This brochure is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal
or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please
note that this agency and its representatives do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
12
Genworth. “2017 Cost of Care Survey.” https://www.genworth.com/about-us/industry-expertise/cost-of-care.html. Accessed Oct. 10, 2017.
13
U.S. Department of Health and Human Services. “Medicaid Eligibility: Financial Requirements – Assets.” https://longtermcare.acl.gov/
medicare-medicaid-more/medicaid/medicaid-eligibility/financial-requirements-assets.html. Accessed Oct. 20, 2017.
14
American Association for Long-Term Care Insurance. “What’s the Best Age to Buy Long Term Care Insurance.”http://www.aaltci.org/long-
term-care-insurance/learning-center/best-age-to-buy-long-term-care-insurance.php. Accessed Sept. 1, 2017.
7
PLAN FOR
LONG-TERM
CARE
ASSISTANCE
#
4
With a longer life comes the greater likelihood of needing assisted living or long-term care.
According to the Genworth 2017 Cost of Care Survey, median costs can range from approximately
$45,000 to $97,455 per year depending on the type of care needed.
12
For a couple, this kind of
care can be costly and is important to consider when developing a long-term care strategy.
Medicare pays for acute care, not long-term residency. Medicaid pays for long-term care but
requires that you “spend down” your assets before coverage kicks in.
13
Individuals who delay
buying long-term care coverage may be considered high risk and may be denied coverage
or charged higher premiums. Costs increase on your birthday. The annual rate increases are
generally 2 to 4 percent in your 50s but start to be 6 to 8 percent per year in your 60s.
14
One of the things you should consider when developing your retirement income strategy is
that the sooner you start thinking, researching, preparing and structuring your long-term
care strategy, the more time and choices you’ll likely have to meet your personal needs
and desires.
YOUR RETIREMENT INCOME PLANNING CHECKLIST
This brochure is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal
or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please
note that this agency and its representatives do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
#
5
15
Centers for Medicare & Medicaid Services. 2016. “National Health Expenditure Projections 2016-2025.” https://www.cms.gov/Research-
Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/proj2016.pdf. Accessed Aug. 21, 2017.
16
Ann C. Foster. Bureau of Labor Statistics. March 2016. “A closer look at spending patterns of older Americans.” http://www.bls.gov/opub/
btn/volume-5/spending-patterns-of-older-americans.htm. Accessed Aug. 8, 2017.
Inflation can be experienced a little differently when you retire. Typically, retirees tend to spend
more money on things that experience a higher rate of inflation. While the medical inflation rate
has decreased in recent years, the government predicts the government-sponsored share of
health spending will account for 47 percent of national health expenditures by 2025.
15
As you can see in the accompanying graph, using the most recent data available from
2012, older Americans devote a substantially larger share of their total budgets to medical
care and housing, which is why these categories receive a higher weighting in the
Consumer Price Index-Elderly (CPI-E). The CPI-E represents households whose reference
person or spouse is 62 years of age or older and, like the other indexes, weights measured
categories according to their importance in the spending patterns of the respective
population. According to the U.S. Department of Labor Statistics, older Americans devote
a substantially larger share of their total budgets to medical care and shelter than the
general population.
16
Even without the higher inflation rate on certain expenses, you still have to account for the fact that
many things cost more over time when planning for retirement income in the future. You’ll want
to consider the amount of retirement income you’ll need and the potential impact of inflation.
8
CONSIDER THE
POTENTIAL IMPACT OF
INFLATION
YOUR RETIREMENT INCOME PLANNING CHECKLIST
This brochure is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal
or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please
note that this agency and its representatives do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
The Rule of 72
The Rule of 72 is a common
method used to determine
the length of time required
for your money to double at a
given interest rate, or the time
for your buying power to be
cut in half due to inflation. It
illustrates why you may need
more income over the course
of your retirement.
If you divide the number
72 by the inflation rate, you
can estimate how quickly
the prices you’re paying now
might double. For example, if
you need $50,000 to live on
today and assume a 3 percent
average annual inflation rate
going forward, in 24 years
(72 divided by 3 = 24) your
income could need to double
to $100,000 a year to
maintain your current lifestyle.
The Rule of 72 is intended to
demonstrate mathematical
principles only and should not
be regarded as an absolute.
Still, when you stop working,
you may need to live on less
income and should consider
the impact of inflation in your
retirement strategy.
This explanation is for
illustrative purposes only,
should not be deemed a
representation of past or future
results and is no guarantee of
return or future performance.
This example does not
represent any specific product
and/or service.
Percent of total expenditures
Consumer Price Indexes for the Elderly, March 2012
Housing
Transportation
Food & Beverages
Medical Care
Recreation
Education & Communication
Apparel
Other Goods & Services
0 5 10 15 20 25 30 35 40 45 50
Bureau of Labor Statistics, U.S. Department of Labor. March 2, 2012. “Consumer Price
Index for the elderly.” http://www.bls.gov/opub/ted/2012/ted_20120302.htm. Accessed
Feb. 26, 2016.
9
YOUR RETIREMENT INCOME PLANNING CHECKLIST
This brochure is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal
or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please
note that this agency and its representatives do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
You can’t control what the markets will do, or when they will do it. The occurrence of
a market downturn, such as in the first few years of retirement, can have an impact on
how long retirement assets may last. The distribution of retirement income differs from
the accumulation of retirement income because, once retired, you may no longer have the
timeline to help you recover from the potential impact of a down market. Consider your long-
term retirement goals and what you wish to accomplish during your retirement.
Your financial situation, risk tolerance and investment objectives all influence what financial
products and allocations you choose to help you work toward specific goals. After your financial
strategy is determined, it’s important to regularly evaluate your allocations to ensure they reflect
your current goals and objectives.
#
6
REGULARLY EVALUATE
YOUR GOALS
YOUR RETIREMENT INCOME PLANNING CHECKLIST
10
This brochure is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal
or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please
note that this agency and its representatives do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
Investing involves risk, including the potential loss of principal. No investment strategy can guarantee a
profit or protect against loss in periods of declining values.
Hypothetical Social Security
Benets Based on
Retirement Age
17
Starting Age Monthly Benet*
62 $700
63 $750
64 $800
65 $866
66 $933
67 $1,000
68 $1,080
69 $1,160
70 $1,240
Continuing to work in order to delay
drawing Social Security benefits also
allows you more time to contribute to
qualified retirement plans, potentially
accruing higher gains than you might
have otherwise.
*Assuming a benefit of $1,000 at a
full retirement age of 67 (for those
born in 1960 or later).
YOUR RETIREMENT INCOME PLANNING CHECKLIST
11
Combine Growth Opportunity With Reliable Income Sources
Traditionally, as pre-retirees approached retirement they
would transition assets from growth-seeking investments
to more conservative fixed-income vehicles. This may have
worked fine back when retirement wasn’t expected to last as
long. However, given today’s longer lifespans, you may need
to pair higher-risk investments with sources of reliable income.
Reliable income sources may include Social Security, pension
benefits, government bonds and insurance products, such as
life insurance and annuities. Retirees may need to utilize a
variety of financial vehicles, such as investments, annuities
and traditional savings vehicles, to meet the challenges of a
longer life and the potential impacts of inflation.
Sequence of Returns
No matter how strong or how long a bull market runs, one
substantial correction can have a resounding effect on
retirement assets. More importantly, however, it isn’t whether
your assets will be affected by a market downturn, but rather
when. The “sequence of returns” in your portfolio refers to the
order in which your investment returns occur. If your portfolio
experiences a downturn while you are still accumulating
assets, there may be time for it to recover any losses.
While you may plan to retire at a certain age, you can’t plan
on how the market will be performing at that time. If your
investments experience a decline when you’re ready to begin
taking income from them, it could affect how much income
you can withdraw over the rest of your life.
One of the things you should consider is that a retirement
income strategy that relies on withdrawals from a combination
of interest earnings, dividends and/or portfolio holdings
may help mitigate the impact of market volatility on your
retirement income.
This brochure is designed to provide general information on the subjects
covered. It is not, however, intended to provide specific legal or tax
advice and cannot be used to avoid tax penalties or to promote, market
or recommend any tax plan or arrangement. Please note that this agency
and its representatives do not give legal or tax advice. You are encouraged
to consult your tax advisor or attorney.
17
Social Security Administration. “Retirement Planner: Full Retirement
Age.” https://www.ssa.gov/planners/retire/retirechart.html.
Accessed Aug. 8, 2017.
YOUR RETIREMENT INCOME PLANNING CHECKLIST
#
7
SOCIAL SECURITY
BENEFITS
12
Perhaps one of the most impactful decisions you can make regarding Social Security benefits
is at what age to begin drawing them. You may be able to apply for Social Security benefits
as early as age 62. However, doing so may permanently reduce the monthly payout you are
eligible to receive. If you wait until full retirement age, you’ll be eligible for the maximum
amount of payout available based on your lifelong earnings. Delaying benefits as long as you
can, or up to age 70, will increase the monthly amount you are eligible to receive.
This brochure is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal
or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please
note that this agency and its representatives do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
YOUR RETIREMENT INCOME PLANNING CHECKLIST
13
While drawing benefits early reduces the monthly payout you
receive, you may receive benefits over a longer time span, so your
lifetime total may be the same. You should consider a number of
factors — such as your income needs, medical history, etc. — to
help determine when to begin drawing benefits.
Spousal Benets
20
When it comes to Social Security benefits for spouses, the
determining factors are the length of marriage, work history
and the age of both spouses. Each spouse needs 10 years
of work history (40 credits) to qualify for individual benefits,
which will be based on an average of the 35 years of highest
earnings.
When applying for Social Security benefits, each spouse will
automatically receive the highest amount for which they are
eligible — either the benefit based on their own work record,
or a derivative (up to 50 percent) of their spouse’s benefit. For
instance, a wife may qualify for a higher benefit based on her
husband’s work history over her own.
To receive benefits based on a spouse’s work history:
Both spouses must be at least age 62.
They need to have been married for at least one year.
The spouse with the stronger work history must apply
for Social Security retirement benefits in order for the
other spouse to collect.
If the higher-earning spouse begins drawing benefits after
attaining full retirement age, the other spouse may receive
a spousal benefit of up to 50 percent of the higher earner’s
benefit. If the higher earner starts drawing early, his or her
benefit and the spousal benefit will be reduced accordingly.
Saving for retirement may seem like a challenge in and of
itself. It’s like standing at the foot of a tall mountain and
mountain and are ready to retire, you face a different task:
figuring out how to take your retirement nest egg you’ve
Saving for retirement may seem like a challenge in and of
Are you eligible for benets based on
your former spouse’s work history?
Divorce Facts
For a divorced spouse to receive
benefits based on the ex’s work
history, the couple must have been
married for 10 years or longer and
both must be age 62 or older. The
death of a spouse increases the
survivor’s benefit.
18
If a former spouse is eligible for
a benefit but has not yet applied
for it, the ex may still apply for the
spousal benefit as long as they have
been divorced for at least two years.
19
Widows and widowers are entitled to
the higher earner’s full retirement
benefit once they have reached full
retirement age, but they can receive
reduced benefits as early as age 60.
20
Once a divorced spouse remarries, he
or she is no longer eligible to receive
a benefit based on the first spouse’s
work history — unless the subsequent
marriage ends in death, divorce
or annulment. A surviving spouse
may claim a reduced benefit on one
working record and then switch to the
other.
21
A qualified divorced spouse may
receive the same benefit as the
current spouse. The current spousal
benefit is not reduced as a result of
this.
22
Financial professionals are able to provide you with information but
not guidance or advice related to Social Security benefits.
This brochure is designed to provide general information on the
subjects covered. Pursuant to IRS Circular 230, it is not, however,
intended to provide specific legal or tax advice and cannot be used
to avoid tax penalties or to promote, market or recommend any tax
plan arrangement. You are encouraged to consult your tax advisor or
attorney.
18
SSA.gov. “Retirement Planner: Benefits For Your Divorced Spouse.” https://
www.ssa.gov/planners/retire/yourdivspouse.html. Accessed Aug. 8, 2017.
19
Ibid.
20
SSA.gov. “Social Security Benefit Amounts For the Surviving Spouse By
Year of Birth.” https://www.ssa.gov/planners/survivors/survivorchartred.html.
Accessed Aug. 8, 2017.
21
SSA.gov. “Retirement Planner: If You Are Divorced.” https://www.ssa.
gov/planners/survivors/ifyou3.html. Accessed Aug. 8, 2017.
22
Ibid.
Each year, the IRS adjusts tax provisions according to the Consumer Price Index to account for
inflation.
23
For 2017, the income brackets for the top income tax rate of 39.6 percent increased
to the following: joint filers, $470,000; singles, $418,400;
24
and head of household, $444,550.
25
Those same income thresholds will apply to the 20 percent tax rate for long-term capital gains and
dividends.
26
On top of those increases, capital gains are subject to an additional 3.8 percent Medicare tax
imposed by the Health Care and Education Reconciliation Act of 2010 for single taxpayers with
incomes over $200,000 ($250,000 for married taxpayers).
14
YOUR RETIREMENT INCOME PLANNING CHECKLIST
#
8
TAXES IN
RETIREMENT
This brochure is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal
or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please
note that this agency and its representatives do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
23
Kyle Pomerleau. Nov. 10, 2016. “2017 Tax Brackets.” https://taxfoundation.org/2017-tax-brackets/. Accessed Aug. 9, 2017.
24
Ibid.
25
IRS. “Tax forms and instructions.” https://www.irs.gov/pub/irs-drop/rp-16-55.pdf. Accessed Aug. 9, 2017.
26
IRS.gov. May 1, 2017. “Topic 409 – Capital Gains and Losses.” https://www.irs.gov/taxtopics/tc409.html. Aug. 9, 2017.
27
SSA.gov. “Survivors Planner: How Much Would Your Benefit Be?” https://www.ssa.gov/planners/survivors/ifyou5.html. Accessed March 8, 2016.
28
Social Security Administration. 2017. “Retirement Benefits.” Page 12. https://www.ssa.gov/pubs/EN-05-10035.pdf.
YOUR RETIREMENT INCOME PLANNING CHECKLIST
Widow(er) Facts
Widows and widowers are entitled to
100 percent of the higher earner’s
retirement benefit if the decedent
spouse had reached full retirement
age before death.
A widow is entitled to 100 percent of
the decedent spouse’s benefit once
she reaches full retirement age.
A widow may receive 71.5 percent of
the decedent spouse’s benefit once
she reaches age 60.
A widow of any age may receive 75
percent of the decedent spouse’s
benefit if she cares for an eligible
child who is under age 16 or disabled.
A surviving spouse may claim a
reduced benefit on one working record
and then switch to the other.
The higher earner can increase the
survivor’s benefit by waiting to receive
benefits until age 70.
Are you eligible for benets based on
your former spouse’s work history?
27
Social Security
Social Security benefits are income tax free for the majority of
beneficiaries. However, a portion of your benefits may be taxed
if your combined income falls within established thresholds.
Combined income includes your adjusted gross income,
nontaxable interest and half of your Social Security benefits. Based
on Internal Revenue Service (IRS) rules, if you file an individual
federal tax return and your combined income is:
28
between $25,000 and $34,000, up to 50 percent of your
benefits may be taxable.
more than $34,000, up to 85 percent of your benefits may
be taxable.
If you file a joint return and you and your spouse have a combined
income that is:
between $32,000 and $44,000, up to 50 percent of your
benefits may be taxable.
more than $44,000, up to 85 percent of your benefits may
be taxable.
If you are married and file a separate tax return, you will likely pay
taxes on your benefits.
Annuities
Annuity income from a nonqualified contract comprises both
principal and any interest credited to the contract, and because
income taxes have already been paid on the principal, it’s only the
credited interest that is taxed as ordinary income. If the annuity is
purchased with pre-tax dollars in a qualified contract such as a
401(k) or traditional IRA, the entire payout is subject to income taxes
because the contributions were never taxed. Note that withdrawals
from an annuity contract will reduce the contract value and the
value of any protection benefits. Additional withdrawals taken
within the contract withdrawal charge schedule will be subject to a
withdrawal charge and, if taken prior to age 59 ½, may be subject
to an additional 10 percent federal tax.
You may wish to reconsider your current financial strategy and
utilize some of those assets to purchase an annuity, which can
provide guaranteed income.
15
This brochure is designed to provide general information on the subjects covered. Pursuant to IRS Circular 230, it is not, however,
intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any
tax plan arrangement. You are encouraged to consult your tax advisor or attorney.
itself. It’s like standing at the foot of a tall mountain and beginning the slow, steady climb
toward your retirement savings goal. However, once you reach the top of that mountain
and are ready to retire, you face a different task: figuring out how to take your retirement
nest egg you’ve accumulated and dole it out over what may be a very long retirement. If
you’re not prepared, you could face challenges, such as not having enough income during
your descent.
This is what an income distribution strategy is all about: how to descend the mountain as
steadily, carefully and securely as possible. How long your retirement income will last can
be significantly impacted by whether you stay within your predetermined budget and don’t
withdraw more income than planned for each year.
One of the common ways of automating your income distribution is called the “spend-
down” strategy. With this strategy, you set up a systematic withdrawal plan (SWP) to pay
you a certain percentage of your account balance at specific intervals. However, if your
portfolio allocation loses significant value or the percentage you withdraw from your total
assets each year is too high, you can run out of money.
To help develop an effective distribution strategy, first identify the retirement income
sources you have available to help pay for your lifestyle in retirement. On one hand,
you’re likely to have some reliable income sources, such as Social Security benefits, a
pension, an annuity or income from a job. You may also have retirement assets designated
to fund your retirement, such as a 401(k) plan, IRA, savings, CDs, mutual funds and
brokerage accounts.
One strategy is to position your reliable income sources to pay for your basic needs, so
you know they’ll be covered. Next, use your other retirement assets to supplement any gap
in the income you absolutely need, and then to pay for the things you want to enhance
your lifestyle.
One of the things to consider when developing your retirement income strategy is that
there’s a difference between saving for retirement and figuring out a suitable way to utilize
your savings once you retire.
16
YOUR RETIREMENT INCOME PLANNING CHECKLIST
#
9
DISTRIBUTION
STRATEGIES
This brochure is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal
or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please
note that this agency and its representatives do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
The transition to individuals having more responsibility for their retirement savings
isn’t the only thing that has changed in the 21st century. As you get closer to
retirement and once you are in retirement, it is prudent to regularly evaluate your
financial strategy to ensure it reflects your current goals and objectives. As you
transition to the income distribution phase, you may want to consider allocating your
assets not just among securities and less conservative financial vehicles but also
among different types of insurance products, such as annuities and life insurance.
By utilizing a variety of financial vehicles, including life insurance or annuities, you
can create a strategy to help you work toward your financial needs and goals for
retirement. By incorporating insurance products into your overall strategy, you may
not realize the same type of growth associated with investments; however, you may
also feel confident knowing that a portion of your retirement assets are not exposed to
market volatility.
When evaluating whether to use insurance products as part of your retirement
income strategy, the following are some of the considerations that should be taken
into account:
Your tolerance for market volatility
Your age
A ballpark estimate of your life expectancy, based on your health and
family history
The amount you expect to spend in retirement for basic needs and
discretionary purchases
The desired value of any legacy you wish to leave behind
The risk and reward characteristics of each financial vehicle as well as the
potential for interest accumulation with insurance products
Liquidity – how much you need to have access to without restrictions
Insurance
It is certainly worth considering strategies that utilize insurance vehicles such as
annuities. Annuities use a lump sum (or series of premium payments) to provide a
supplemental source of retirement income. They are subject to surrender charges
and holding periods, which vary by carrier. By purchasing an annuity, you can
generate a reliable income stream.
Retirement income strategies and products you may wish to consider can include a
systematic withdrawal plan from fixed or fixed index annuities, life insurance, long-
term care insurance and a variable annuity with a guaranteed income rider.
17
THE ROLE OF
FINANCIAL
PRODUCTS IN RETIREMENT
YOUR RETIREMENT INCOME PLANNING CHECKLIST
#
10
Have you answered these
questions?
What is your
“personal rate of
return” — the rate
of return, based on
the income you need,
that you may have to
earn to avoid running
short of money during
retirement?
What are the potential
benefits of delaying
your Social Security
benefits?
Can your current
income and savings
last throughout
retirement?
What impact can
taxes and inflation
have on your income
needs?
If you pass away, will
your spouse have
enough income?
How can a down
market impact your
retirement income
strategy?
This brochure is designed to provide general information on the subjects covered. It is not,
however, intended to provide specific legal or tax advice and cannot be used to avoid tax penalties
or to promote, market or recommend any tax plan or arrangement. Please note that this agency
and its representatives do not give legal or tax advice. You are encouraged to consult your tax
advisor or attorney.
IRA
For 2018, the income ranges at which
the tax deduction for traditional IRA
contributions will phase out (if the
taxpayer is covered by a retirement plan
at work) are:
$63,000 to $73,000 for a single filer
$101,000 to $121,000 for married
couples filing jointly
$189,000 to $199,000 for married
couples filing jointly (and the spouse
who makes the IRA contribution
is not covered by a workplace
retirement plan)
$0 to $10,000 for married couples
filing separately
29
26
IRS.gov. Oct. 19, 2017. “IRS Announces 2018 Pension Plan Limitations; 401(k) Contribution Limit Increases to $18,500 for 2018.” https://
www.irs.gov/newsroom/irs-announces-2018-pension-plan-limitations-401k-contribution-limit-increases-to-18500-for-2018. Accessed Oct. 24,
2017.
18
If you waver back and forth between using a traditional or Roth IRA,
consider using them in concert with an IRA strategy that can help to
reduce taxes when you begin taking withdrawals. For example, you
may want to contribute to a traditional IRA to defer more taxes when
your marginal income tax rate is potentially higher, and then convert
the assets to a Roth IRA (a taxable event) when tax rates are lower so
you position them for tax-free distributions in retirement. You may
repeat this process indefinitely.
Annuity
An annuity is a contract you purchase from an insurance company.
For the premium you pay, you receive certain fixed and/or variable
interest crediting options that can compound interest tax-deferred
until withdrawn. When you’re ready to receive income, an annuity
offers a variety of guaranteed payout options through a process known
as “annuitization.”
The array of annuity contracts on the market today include immediate,
fixed, fixed index and variable annuities. The choices can allow you
to match very specific, individual needs with a suitable product.
Different contracts and carriers offer a range of interest crediting
methods, payout terms and death benefit choices. Many also offer
a variety of riders available for an additional fee, including those
that address inflation or provide a minimum guaranteed income.
An annuity purchase can be strategically positioned within your
overall portfolio for a specific personal objective, such as income for
your spouse should you die first, or an inheritance for your children.
Coverage is available for two people within one contract, so you
don’t have to purchase a separate contract for your spouse.
These are long-term vehicles and are subject to surrender charges
and holding periods, which vary by product. Additional fees may be
charged for riders. Withdrawals will reduce the contract value and,
if taken before age 59 ½, an additional 10 percent federal tax may
apply. Withdrawals are taxed as ordinary income. Be sure to evaluate
any products in light of your personal situation before purchasing.
All guaranteed benefits are backed by the financial strength and
claims-paying ability of the issuing insurer.
Fixed index annuities may be subject to restrictions, limitations and
early withdrawal fees or surrender charges.
The minimum guaranteed account value in most fixed annuity contracts
is equal to 87.5 percent of the premiums paid into the contract,
accumulated at an annual interest rate of between 1 and 3 percent.
YOUR RETIREMENT INCOME PLANNING CHECKLIST
This brochure is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal
or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please
note that this agency and its representatives do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
19
Annuity With a Guaranteed Lifetime
Withdrawal Benet
Today’s annuities offer a variety of income
options to help ensure that your initial
purchase offers income that can last the
rest of your life. A guaranteed lifetime
withdrawal benefit (GLWB) is available
through a rider you can purchase at an
additional cost with an annuity that allows
for minimum withdrawals without having
to annuitize the contract. Product features
and availability will vary by state.
Fixed Index Annuity
The fixed index annuity combines a
minimum guaranteed account value*
and the opportunity for higher interest
credits that are linked to the performance
of an external market index. While tied
to a market index, the annuity does
not actually participate in the market.
Interest credits are typically calculated
at the end of each contract year, but
options may vary by product and
YOUR RETIREMENT INCOME PLANNING CHECKLIST
company. The insurance company measures the performance
of the annuity’s linked index (such as the S&P 500
®
) over
the previous 12 contract months and credits interest
based on any growth in the index, subject to caps, spreads
and participation rates, which will limit the amount
of interest you may earn, but it will never be less than
0 percent. With a fixed index annuity, you receive the guarantee
of a minimum account value along with the opportunity to receive
conservative interest credits linked to market performance.
Life Insurance
Whole life insurance includes a tax-free death benefit and also
provides a component for accumulating cash value within the
contract. The insurance policy can include tax-deferred
accumulation over the long-term and the potential for dividends.
These advantages are guaranteed by the financial strength
and claims-paying ability of the issuing insurer.
A universal life insurance policy can allow you to vary the amount
and timing of when you pay premiums and may also permit you
to change the amount of the subsequent death benefit. Indexed
Universal Life insurance (IUL) offers many of the same benefits as
traditional universal life insurance, with one primary difference:
the way interest is credited to the cash value of the policy. IUL
interest is credited to the cash value based on the movement of
This brochure is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal
or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please
note that this agency and its representatives do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
* Guarantees are backed by the financial strength and claims-paying ability of the issuing insurer.
20
a specific stock market index or indexes over a specific period of time, within
the parameters of a cap and a floor without directly participating in the market.
A variable universal life policy includes an investment feature, which means
the cash value of the policy will fluctuate based on the investment performance
of a separate account that offers a variety of investment options. Life insurance
policies may be subject to restrictions, limitations and early withdrawal fees or
surrender charges.
Investments
Municipal Bonds
Tax-exempt municipal bonds can be an excellent tax-advantaged investment,
especially for those in high-income tax brackets. Interest earned on municipal
bonds is exempt from federal income taxes and, in most states, from state and
local taxes for residents of the issuing state. Please consult your personal tax
advisor to discuss your unique situation. A primary advantage of purchasing
a municipal bond is the after-tax yield compared to that of a taxable security.
The yield advantage is potentially enhanced with longer maturity bonds and for
those individuals in higher income tax brackets.
Laddered Bonds
Laddering your bond portfolio is a way to stagger your assets for income or
reinvestment at varying intervals. When you spread your investments across
a range of short-term, medium-term and long-term bonds, they will mature
at different times and can allow you ongoing access to funds as well as the
opportunity to reassess interest rates to determine if reinvestment is a strategy
you may want to consider for retirement income at that given time.
Bond obligations are subject to the financial strength of the bond issuer and its
ability to pay. Before investing, consult your financial professional to understand
the risks involved with purchasing bonds.
Dividend-Paying Stocks
High dividend-paying stocks can be particularly attractive because they are
generally more tax-efficient than bond interest. Dividends paid out by stocks
are taxed at the lower long-term capital gains and qualified dividend income
rate — currently up to 20 percent at the federal level. Bond interest, on the
other hand, is taxed at your ordinary income tax rate — currently as high as
39.6 percent.
It is important for investors to understand that dividends are paid at the
discretion of the board of directors and are therefore not guaranteed.
Investing involves risk, including the potential loss of principal. No investment
strategy can guarantee a profit or protect against loss in periods of declining values.
YOUR RETIREMENT INCOME PLANNING CHECKLIST
This brochure is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal
or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please
note that this agency and its representatives do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
Long-Term Care Insurance
Long-term care insurance
(LTCI) may offer flexibility
and can be a viable choice for
baby boomers still enjoying
good health and relative
wealth. LTCI is designed to
help people pay for short- or
long-term care and housing
costs at an assisted living
facility, nursing home or even
in your own home — often
the preference of seniors.
Typically, purchasing a policy
while you are younger may
allow you to pay lower premium
rates, but even at a later age, it
may still be worth considering
purchasing an LTCI policy for
the benefits it can provide.
LTCI policies are subject to
restrictions, limitations and
medical underwriting.
CONCLUSION
While the “greatest generation” experienced the burgeoning of government
and corporate retirement income and health plans, baby boomers and future
generations are seeing these benefits being reduced or eliminated altogether.
The baby boomer generation will continue to take on more responsibility for
providing income for their own essential living expenses in retirement, like
housing, food and health care.
Recent market corrections and economic challenges have caused some
Americans to rethink their retirement income strategy. In fact, you may need
to reposition your retirement assets to accommodate a longer life with fewer
assets than you previously thought. This is a good time to think about your true
priorities and align your assets to support your personal goals (not just your
financial aspirations).
The bulk of the responsibility for providing retirement income has shifted to
individuals, and the new products and strategies designed to help you prepare
for retirement require understanding. Working with financial professionals you
trust can help ensure that your financial strategy is designed to help you reach
your long-term financial goals.
The firm that provided you with this booklet helps individuals create retirement
strategies using a variety of investment and insurance products to custom suit
their needs and objectives.
21
Additional questions to
consider:
Which assets should
you hold in tax-deferred
vehicles versus taxable
vehicles?
From which financial
vehicles should income be
withdrawn first?
When will you start taking
Social Security?
Should you roll over a
401(k) to an IRA?
Who should be your
designated beneficiary(ies)?
Would a Roth IRA
conversion be appropriate?
What tax decisions should
you address when leaving
an employer?
YOUR RETIREMENT INCOME PLANNING CHECKLIST
This brochure is designed to provide general information on the subjects covered. It is not, however, intended to provide specific legal
or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or arrangement. Please
note that this agency and its representatives do not give legal or tax advice. You are encouraged to consult your tax advisor or attorney.
This brochure is designed to provide general information on the subjects covered. It is not, however,
intended to provide specific legal or tax advice and cannot be used to avoid tax penalties or to promote, market or recommend any tax plan or
arrangement. Please note that this agency and its representatives do not give legal or tax advice. You are encouraged to consult your tax advisor
or attorney.
*Annuities are long-term, tax-deferred investments intended for retirement purposes.
Any withdrawals may be subject to income taxes and, prior to age 59, a 10-percent federal
penalty tax and state penalty taxes may apply to the taxable amount. Withdrawals from
annuities will affect both the cash value and the death benefit.
Investing involves risk, including the loss of principal. No investment strategy can guarantee a profit or protect against loss in periods of
declining values. Any references to protection benefits or
lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product
guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.
We are an independent financial services firm helping individuals create retirement strategies using a variety of investment and
insurance products to custom suit their needs and objectives.
Investment advisory services offered through Kingdom Financial Group, LLC, an SEC Registered
Investment Advisor. We are an independent firm helping individuals make retirement income
planning more successful by using a variety of strategies to custom suit their needs and objectives. By contacting us you may be
provided information about insurance products and investment
opportunities. Annuity product guarantees are subject to the claims-paying ability of the issuing
company, and are not offered by Kingdom Financial Group, LLC.
Content prepared by Advisors Excel
AE11179310C
Phone: (623) 974-0300
Fax: (623) 974-0330
info@fullertonfp.com
www.fullertonfp.com
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14155 N. 83rd Ave.
Suite 144
Peoria, AZ 85381
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600 E. Rio Salado Pkwy.
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