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Planning Your Great Escape - Retirement
- 1. PLANNING YOUR GREAT ESCAPE: RETIREMENT GE 108614 (1/16) (Exp 1/18)
- 2. 2 important information Securities are offered through AXA Advisors, LLC. Insurance and annuity products are offered through AXA Network, LLC. AXA Network conducts business in CA as AXA Network Insurance Agency of California, LLC, in UT as AXA Network Insurance Agency of Utah, LLC, in PR as AXA Network of Puerto Rico, Inc. AXA Advisors and AXA Network do not provide tax or legal advice. Ascend Planning & Consulting, LLC is not a registered investment advisor and is not owned or operated by AXAAdvisors or AXA Network. This presentation is provided for information purpose, only and should not be construed as investment advice, and you should seek professional advice based on your specific personal circumstances. Please be advised that this document is not intended as legal or tax advice. Accordingly, any information provided in this document is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of avoiding penalties that may be imposed on the taxpayer. The tax information was written to support the promotion or marketing of the transaction(s) or matter(s) addressed, and you should seek advice based on your particular circumstances from an independent tax advisor.
- 3. 3 important information AXA Advisors believes that education is a key step toward addressing your financial goals, and this material is designed to serve simply as an informational and educational resource. Accordingly, this material does not offer or constitute investment advice and makes no direct or indirect recommendation of any particular product or of the appropriateness of any particular investment-related option. Your needs, goals, and circumstances are unique, and they require the individualized attention of your financial professional. But for now, take some time just to learn more.
- 4. 4 agenda The New Retirement Realities Overcoming the Challenges: Retirement planning guidelines for the four major life stages — Building Assets, Protecting Assets, Enjoying Retirement, Leaving a Legacy Working with a Financial Professional
- 5. 5 the new retirement realities We’re living longer retirement costs more Continued inflation Increased market volatility Higher taxes? Rising interest rates? Social Security and Medicare uncertainty Reduced or no employer retirement support
- 6. 6 retirement may last longer and could cost more Sources: Median Life Expectancy: http://www.cdc.gov/nchs/data/hus/hus14.pdf#015 Average Retirement Age Retirement 2015: http://www.gallup.com/poll/168707/average-retirement-age-rises.aspx. Average Age of Retirement: 1960: www.bls.gov/opub/mlr/2001/10/art2full.pdf, p 14,
- 7. 7 inflation is down...but not out Based on an average historical (1913-2015) inflation rate of 3.18%1… …you will need $209 in 25 years to purchase goods valued at $100 today.2 In 25 Years: $51,638 Subaru Outback Station Wagon Cost 1) Source: http://inflationdata.com/Inflation/Inflation/DecadeInflation.asp 2) Source: http://www.buyupside.com/calculators/inflationjan08.htm 3) Source: http://www.subaru.com Today: $24,995 In 25 Years: $52,334
- 8. 8 Monthly Close - Dow Jones Industrial Average January 2009 – January 4, 2016 The markets are volatile…
- 9. 9 Source: http://www.taxpolicycenter.org/taxfacts/Content/PDF/toprate_historical.pdf 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Top Marginal Income Tax Rate Taxes at historic lows
- 10. 10 Source: http://www.federalreserve.gov/releases/h15/data.htm Bank Prime Loan Rate – 1975 to 2015 Interest rates also at historic lows
- 11. 11 fewer pensions and gold watches Trend is that fewer employers providing guaranteed lifetime pensions. Greater job turnover means less build-up in 401(k)s, with less vesting. There’s no protection against companies cutting their “matches.”
- 12. 12 Source: http://www.cbo.gov/doc.cfm?index=3521&type=0 0 4 8 12 16 20 24 2000 2010 2020 2030 2040 2050 2060 2070 2075 %ofGDP Expenditure as a % of GDP Medicaid Medicare Social Security This chart illustrates a potential path for the budget that highlights projections of spending under current policies for the largest federal entitlement programs—Social Security, Medicare, and Medicaid. social security and medicare in bad health
- 14. 14 four major financial life stages Build Protect Enjoy Give
- 15. BUILD
- 16. 16 make the most of the building years Power of regular saving The power of starting early Tax breaks from the government Additional tax advantaged opportunities Investment choices/vehicles – risk and rewards – asset allocation Dollar-cost averaging What if you need to save for college too?
- 17. 17 the power of regular saving $2,400 year ($200/month) compounded annually 0 Percent 3 Percent 7 Percent Hypothetical Example Illustration does not take inflation, taxes, or management fees into account. This example is not intended to indicate the performance of any specific investment. Rates of return will vary over time, particularly for long-term investments. Investments offering the potential for higher rates of return also involve a higher degree of risk. Actual results will vary.
- 18. 18 Age Years Until 65 Monthly Contribution Total Contribution Growth* Total Value 25 40 $189 $90,905 $409,095 $500,000 30 35 $276 $115,920 $384,070 $500,000 35 30 $407 $146,689 $353,311 $500,000 40 25 $614 $184,090 $315,905 $500,000 45 20 $954 $229,023 $270,977 $500,000 50 15 $1,568 $282,299 $217,701 $500,000 * Chart assumes 7% growth for illustrative purposes. The figures are rounded and are not intended to indicate the performance of any specific investments. Taxes, inflation and fees were not taken into consideration. Rates of return will vary over time, particularly for long-term investments. Investments offering the potential for higher rates of return also involve a higher degree of risk. Actual results will vary. Hypothetical Example the sooner you begin investing, the better
- 19. 19 From your employer • Roth after-tax (401(k) / 403(b)) • Pre-tax (401(k), 403(b), SIMPLE or SEP IRA, etc.) • Don’t lose your employer’s match! (free money) • Rollovers and consolidation On your own (Traditional or Roth IRA) • When you can, contribute to both 401(k) and IRA • Spousal IRAs • SEP IRA for side business • When to consolidate scattered IRAs Note: Withdrawals for these types of plans are taxable and if taken prior to age 59½ may also be subject to an additional 10% federal income tax penalty. don’t overlook your employer-sponsored retirement plans or IRAs for tax breaks
- 20. 20 Fixed Annuities • Tax-deferred accumulation • Guaranteed* Retirement Income Municipal Bonds • Can be purchased individually or through funds • Can be triple tax free Permanent Life Insurance • Death benefit and potential to build cash value • Tax-deferred accumulation * Guarantees are backed by the claims-paying ability of the issuing company additional tax-advantaged opportunities
- 21. 21 investment choices/asset classes Stocks Bonds Mutual funds Real estate Commodities CDs
- 22. 22 the critical importance of asset allocation Chart illustrates sample portfolio asset allocations. Allocations are presented only as examples and are not intended as investment advise. Please note that asset allocation does not guarantee a favorable outcome. Consult a financial professional if you have any questions about how these examples may apply to your situation. Sources: Standard and Poor’s; Center for Research and Security Prices; Morgan Stanley; the Federal Reserve. For the 20-year period ended 12/31/05. 30% 40% 30% Stocks Bonds Treasury Bills Nearing/In Retirement Low Risk Portfolio Risk Level Middle-Aged Moderate Risk Younger Investors Aggressive Risk
- 23. 23 Not based on “hot tips” or hearsay Research and analyze your investments choose your investments wisely
- 24. 24 the advantages of dollar-cost averaging Lets you buy more shares when prices are low and fewer when they rise. Schedule Regular Investment Market Price /Share Shares Acquired Accumulated Shares Total Investment Value Month 1 $120 $5.00 24 24 $120 Month 2 $120 $2.50 48 72 $180 Month 3 $120 $4.00 30 102 $408 Month 4 $120 $6.00 20 122 $732 Month 5 $120 $8.00 15 137 $1,096 Investment in 5 months: $600 for 137 shares –––– Average cost per share: $4.38 –––– Total Value: $1,096 The result: dollar-cost averaging typically provides a lower average cost per share, and therefore the potential for higher profit over time. This table is hypothetical and for illustrative purposes only and is not indicative of any investment. Please note that dollar-cost averaging does not guarantee a profit or protect against loss in a declining market. Dollar-cost averaging involves continuously investing in securities regardless of fluctuating price levels, an investor should consider his/her ability to continue purchasing through low price periods.
- 25. 25 what if you need to save for college at the same time? May seem counterintuitive, but … Many sources of college grants and loans No sources of retirement gifts and loans Greater gift to your children to first provide for an independent retirement than to end up depending on them later in life Great if you can save for both, but save for college only after maximizing your company matches and IRS retirement account tax advantages
- 26. PROTECT
- 27. 27 it’s what you keep that counts The closer you get to retirement, the more you need to protect your nest egg: From the market From inflation From taxes From financial failure of provider From yourself
- 28. 28 reducing the impact of market volatility Asset allocation Careful investment selection Dollar-cost averaging Rebalancing Products with guarantees
- 29. 29 investing to attempt to outpace inflation Source: http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/histretSP.html http://dqydj.net/sp-500-return-calculator/ http://www.in2013dollars.com/1926-dollars-in-2015?amount=100 Investments and inflation between 1926 and 2015
- 30. 30 the power of tax deferral The chart is for illustrative purposes only. 466,096 320,714 374,572 $0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000 $400,000 $450,000 $500,000 This hypothetical illustration shows how a $100,000 investment in a tax- deferred account versus a fully taxable account after 20 years. It assumes an individual is in the 25% tax bracket, as well as an 8% return. This hypothetical example is for illustrative purposes only. The 8% return is not intended to reflect the actual performance of any product or any other investment. This example does not reflect deductions for any fees or expenses -- such as the mortality expense charge, sales charge, or administrative fee that are assessed with a variable annuity -- which would reduce the investment performance shown. The AXA Equitable Accumulator variable annuity for example contains a mortality and expense charge of 0.80%, distribution charge of 0.30% and an administrative fee of 0.30% Tax rates and tax treatment of earnings may impact comparative results. Lower maximum tax rates on capital gains and dividends would make the return of the taxable investment more favorable, thereby reducing the difference in performance between the accounts shown. State and local taxes should also be considered. Withdrawals made prior to age 591/2 may result in an additional 10% federal tax penalty. Please consider your personal investment horizon and income tax bracket, both current and anticipated, when making an investment decision as these may further impact the results of the comparison. Tax-Deferred Investment (Before Tax) Fully Taxable Investment Tax-Deferred Investment (After Tax)
- 31. 31 Stock ratings Mutual fund ratings Bond ratings Insurer ratings Bank ratings identifying quality & strength Examples of rating Firms: Morningstar Standard & Poor’s Moody’s A.M. Best Bankrate.com
- 32. 32 protection from yourself Don’t spend your retirement assets Don’t borrow from them Don’t stop your regular contributions
- 33. 33 insurance protections Insurance Life Homeowners Liability Health Disability Casualty Auto Long-Term Care Business
- 34. ENJOY
- 35. 35 retirement years – considerations Sources of retirement income How to potentially maximize/extend your income How to maintain a minimum lifetime income Maximizing your Social Security benefits Long Term Care planning
- 36. 36 sources of retirement income Pensions Social Security Savings Accounts Annuities 401(k) – employee retirement plans IRAs General (taxable) investment accounts Dividend-paying stocks Bonds Mutual funds Exchange traded funds
- 37. 37 making the most of your retirement income Get the right asset allocation for you Determine your withdrawal rate Seek to maximize dividends and interest Get income guarantees
- 38. 38 how to get lifetime income security Immediate fixed annuities Variable annuities with living benefits Annuities are long-term financial products designed for retirement purposes. In essence, annuities are contractual agreements in which payment(s) are made to an insurance company, which agrees to pay out an income or a lump sum amount at a later date. There are contract limitations and fees and charges associated with annuities, which include, but are not limited to, mortality and expense risk charges, sales and withdrawal charges, administrative fees, and charges for optional benefits. Amount in a variable annuity’s investment portfolios are subject to fluctuation in value and market risk, including loss of principal. A financial professional can provide cost information and complete details. Guarantees of a minimum income amount are generally optional, require an additional fee, and contain certain restrictions and limitations. Guarantees are based on the claims-paying ability of the issuing insurance company. Withdrawals from annuities may be subject to normal income tax treatment and if taken prior to age 59½ may be subject to an additional 10% federal income tax penalty. Withdrawals may also be subject to a contractual withdrawal charge. Living Benefits are optional riders that can be added at an additional fee.
- 39. 39 social security essentials Benefits Timing is everything Taxation Maximizing benefits
- 40. 40 long term care planning Increasing need – children/relatives may be less available for elder care People age 65 will face at least a 40 percent lifetime risk of entering a nursing home sometime during their lifetime* Care is expensive – average annual cost of a private room in a nursing home in the U.S. is $50,000 a year. In some regions, it can easily cost twice that amount* LTC not paid by Medicare; home care not covered by Medicaid LTC insurance premiums may be tax deductible With LTC insurance, the younger you purchase typically the lower the premiums * Source: https://longtermcare.genworth.com/comweb/consumer/pdfs/long_term_care/GE805_AHIP_Guide_Crono.pdf
- 41. GIVE
- 42. 42 preserving an estate and maximizing legacies – considerations Estate taxes Estate planning strategies Life insurance
- 43. 43 guarding against estate taxes The potential amount of your estate that may go to federal estate taxes and not your heirs. 40%* The maximum estate tax rate is now 40 percent with an applicable exclusion amount of $5.45 million. Source: www.irs.gov
- 44. 44 do you intend to leave behind a legacy? A comprehensive estate plan enables you to: Decide who receives a share of your assets Decide how and when your beneficiaries receive their inheritance Decide who will manage your estate Select a guardian for your young children Provide for the orderly continuance or sale of a family business
- 45. 45 Provides “instant estate” Can fill in gaps in support Can pay estate taxes Proceeds may be income-tax free Can keep a business/professional practice alive, owned by those you wish Can provide extra amounts for charities and schools Life insurance contains certain exclusions, limitations and terms for keeping it in force. For costs and complete details of coverage, contact a financial professional. life insurance can help make a difference
- 46. 46 benefits of using a financial professional A financial professional has the experience and know-how to: Develop a strategy to help you address your retirement goals and objectives Provide objective, unemotional guidance and answers to your retirement questions Recommend appropriate financial products Potentially help minimize the bite of taxes Review your situation regularly, and provide ongoing check-ups Refer you to other necessary professionals – Estate Planning attorneys and accountants Reduce your stress and save time
- 47. CONCLUSION: KEY POINTS TO REMEMBER
- 48. 48 retirement escape with confidence Start saving for retirement early Take advantage of helping hands along the way –– tax breaks and employer matches Use asset allocation and other proven investment strategies Protect your assets — from taxes, the markets, health costs, yourself Maximize your retirement income and final legacies Consider using a professional(s) Review your financial situation regularly
- 49. If you have any questions or would like to schedule a complimentary initial consultation, please email us at info@ascedndplanning.com or call (703) 205-0402. Our difference is our team. Ascend Planning & Consulting, LLC is comprised of a group of top financial advisors who are registered representatives of one of the nation’s largest and financially strong financial companies, AXA Advisors, LLC. Under the direction of our founders, we have assembled a highly sophisticated and knowledgeable group of advisors to help you with all of your business and personal planning needs. Ascend Planning & Consulting, LLC is not a registered investment advisor and is not owned or operated by AXA Advisors or AXA Network.