4. How much do you think you’ll need in retirement? Source: Employee Benefit Research Institute and Matthew Greenwald & Associates, Inc., 2007 Retirement Confidence Survey.
5. How much will you actually need? Assumes 25 years of retirement, and a retirement nest egg growing at 6% annually, compounded monthly and adjusted for 3% inflation. $1,800,000 $100,000 $3,600,000 $200,000 $890,000 $50,000 You’ll need to save To replace an annual income of
6. Take advantage of tax-sheltered savings plans Additional contributions for those age 50 and over $5,000 Employer’s retirement plan $1,000 Traditional or Roth IRA $5,000 Roth IRA After-tax contributions, tax-free withdrawals $5,000 Traditional IRA Before-tax contributions (if you qualify), tax-deferred earnings $15,500 Employer’s retirement plan Before-tax contributions, tax-deferred earnings 2008 limit
7. Does a Roth IRA make sense? Are you interested in passing more assets to your heirs? Would you like the option of tax-free income in retirement? Do you expect overall tax rates to increase in the future? Do you expect to pay less in taxes during retirement?
8. Don’t underestimate college costs Four years of tuition, room, and board Source: The College Board, 2007. * Assumes a 5.5% inflation rate. 2007 2007 2025 estimated 2025 estimated
15. Identify potential sources of income Immediate annuity 401(k) withdrawals Long-term care insurance Real estate Life insurance IRA withdrawals Part- or full-time work Social Security Pension income Later in retirement Early in your retirement
16. Choose the right withdrawal rate IMPORTANT: The projections or other information in this hypothetical illustration are generated by a 10,000-iteration Monte Carlo simulation that shows the likelihood of various investment outcomes. This illustration uses the historical returns from 1926 to 2006 of stocks (as represented by the S&P 500), bonds (U.S. long-term government), and cash (U.S. 30-day T-bills). The projections do not reflect actual investment results and are not guarantees of future results. You should consider your other assets, investment options, and risk tolerance when planning for your specific investment goals. Consult your financial representative for more information. How long will your money last? Annual withdrawal percentage
17. Watch your asset allocation 98% 93% 89% 51% 72% 17% 61% 75–100% probability 50–74% probability 0–49% probability How long will your money last? IMPORTANT: The projections or other information in this hypothetical illustration are generated by a 10,000-iteration Monte Carlo simulation that shows the likelihood of various investment outcomes. This illustration uses the historical returns from 1926 to 2006 of stocks (as represented by the S&P 500), bonds (U.S. long-term government), and cash (U.S. 30-day T-bills). The projections do not reflect actual investment results and are not guarantees of future results. You should consider your other assets, investment options, and risk tolerance when planning for your specific investment goals. Consult your financial representative for more information. 95% 24% 3% 71% 58% 0% Stocks 70% Bonds 30% Cash PRESERVATION 80% Stocks 20% Bonds 0% Cash GROWTH 60% Stocks 30% Bonds 10% Cash BALANCED 20% Stocks 50% Bonds 30% Cash CONSERVATIVE 40 YEARS 30 YEARS 20 YEARS ALLOCATION PORTFOLIO TYPE
18. Consider tax consequences when planning for income * For tax years 2008–2010, taxpayers in the 10% and 15% income tax brackets will have a 0% tax rate on long-term capital gains and qualified dividends. Part earnings (taxed as ordinary income) and part return of capital (not taxed) Annuity income Taxability Type of income 15% rate Long-term capital gains* 15% rate Dividend income* Ordinary income rates IRA and 401(k) distributions Taxed as ordinary income Pension income May be partially taxable as ordinary income Social Security
25. Stretch the life of your IRA Income is based upon an initial investment of $200,000 and cumulative annual distributions for 39 years. This hypothetical illustration assumes an 8% annualized return (8.30% effective return) and that distributions are kept to the required minimum. It does not represent the performance of any Putnam fund or investment or take into account the effect of any fees or taxes. Investors should consider various factors that can affect their decision, such as possible changes to tax laws and the impact of inflation and other risks, including periods of market volatility when investment return and principal value may fluctuate with market conditions. The Stretch IRA feature is designed for investors who will not need the money in the account for their own retirement needs. Stretched for more than 30 years, an IRA owner’s $200,000 IRA eventually pays over $3 million in income His wife dies at age 70, ten years after the IRA was created and before taking RMDs. The following year, their son (age 46) begins receiving annual payments based on his life expectancy. He names his wife as his beneficiary. This chart shows annual Required Minimum Distributions in selected years 29 years later, the son dies. His wife continues the established distribution schedule. She may not treat the IRA as her own and no rollover is available. The IRA is depleted. First distribution Year 10 distribution Year 20 distribution Year 30 distribution Year 39 distribution
30. CollegeAdvantage is offered and overseen by the Ohio Tuition Trust Authority. Ohio taxpayers may obtain state tax benefits through the plan. However, anyone may invest in the plan and use the proceeds to attend school in any state. Before investing, consider whether your state's plan or that of your beneficiary offers tax and other benefits not available through CollegeAdvantage. If you withdraw money for something other than qualified higher education expenses, you will owe federal income tax and may face a 10% federal tax penalty on earnings. Consult your tax advisor. You should carefully consider the investment objectives, risks, charges, and expenses of the plan before investing. Ask your financial representative or call Putnam at 1-800-225-1581 for an offering statement containing this and other information for Putnam CollegeAdvantage, and read it carefully before investing. Putnam Retail Management, principal underwriter. Putnam Investment Management, investment manager. Investors should carefully consider the investment objective, risks, charges, and expenses of a fund before investing. For a prospectus containing this and other information for any Putnam fund or product, call your financial representative or call Putnam at 1-800-225-1581. Please read the prospectus carefully before investing. This information is not meant as tax or legal advice. Please consult your legal or tax advisor before making any decisions. Shares of mutual funds are not deposits or obligations of, or guaranteed or endorsed by, any financial institution; are not insured by the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any other agency; and involve risk, including the possible loss of the principal amount invested. Putnam Retail Management www.putnam.com