Post on 18-Aug-2020
Her Retirement Planning Coursefor Women (& their guests)
Presented by: Brian Saranovitz, Investment Advisor Representative
Your Retirement Advisor
435 Lancaster St., Suite 358 - Leominster, MA 01453
This material is intended to provide general financial education and is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any Federal tax penalties. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel.
Securities and advisory services offered through Cetera Advisors LLC, member FINRA/SIPC, a broker/dealer and registered investment adviser.
Cetera is under separate ownership from any other entity.
Hi. I’m Lynn. Welcome to Class.
However…this is More Than a Class.
Hi…I’m
Lynn
It’s the start of an educational process to help you live the retirement you’ve imagined.
Step 1. Get Smart About Retirement
Complete this class
Q&A session & complementary Retirement Efficiency Assessment with Brian
Decision to begin the rest of the planning process
www.HerRetirement.com
About Her Retirement
A planning platform and
suite of resources to
address gaps in knowledge,
preparedness and advice.
The Planning Platform
The Suites of Resources
Your Class Instructor
www.YourRetirementAdvisor.com
Brian Saranovitz of Your Retirement Advisor
YRA is a one-stop retirement advisory practice focused on pre-retirees 50-70 years old
Offices in Acton, Worcester & Leominster
Services offered online across US
Resident retirement “geek”
Investment Advisor Representative with 30 years experience
Former professional football player: Patriots, USFL, Arena.
Some People Think Brian is…
Gronk’s Father!
Brian Featured in National News Media& author of many white papers
https://yourretirementadvisor.com/2018/08/07/brian-saranovitz-featured-in-forbes/
Housekeeping
Handouts
Presentation page numbers
What’s Inside
Bring your folder/presentation next week
Asking Questions
Breaks
Homework & Class Landing Page on HR website
Complete Your Financial Inventory(for a Retirement Efficiency Assessment)
Class Evaluation Form
Disclaimer: Investments in securities do not offer a fix rate of return. Principal, yield and/or share price will
fluctuate with changes in market conditions and, when sold or redeemed, you may receive more or less than
originally invested. No system or financial planning strategy can guarantee future results. Therefore, no
current or prospective client should assume that future performance or any specific investment, investment
strategy or product will be profitable.
The Topics We’ll Cover in Class
The Need for Proper Planning
Challenges Unique to Women
Building Your Plan
Retirement Risks
Income Distribution: o Expenses, Income Sources, Gaps
o Hybrid Income Portfolio
o Portfolio Costs
o Tax Efficiency
o Income Projections
Income Protection: o Healthcare/Medicare
o Long Term Care & Life Insurance
o Estate Planning
Pulling it All Together: Case Study
Where to Get Help
Next Steps:o Q & A Session & REA with Brian
Class Content Based on Research vs. Rhetoric
“All too often we base our investment decisions on industry marketing and advertising or on what we read and hear in the media or on something
else altogether.”-Robin Powell, financial journalist
Retirement Based on Research
(vs. Rhetoric)
We believe the best route to making reliable, data-driven decisions about your retirement (vs. best guesses or gut feel) is to open your mind and rely on research and analysis, cutting edge technology, and academically proven strategies.
We call this science-based planning
Powerful and reliable. We’re 100% committed to it (and you should be too)!
Some of the Researchers We Follow
Moshe Milevsky, PhD
Professor of finance at York University a leading authority on the intersection of wealth management, financial mathematics and insurance
Michael Finke, PhD
Chief Academic Officer at The American College of Financial Services
David Blanchett, PhD, CFA, CFP
Head or retirement research at Morningstar and thought leader in the fields of wealth management and retirement
Jack Guttentag, PhD
Professor emeritus of finance at the University of Pennsylvania and Consumer advocate
Some of the Researchers We Follow
Wade Pfau, PhDProfessor of Retirement Income in the PhD in Financial and Retirement Planning program at The American College of Financial Services
Larry Kotlikoff, PhDProfessor of Economics at Boston University
Roger Ibbotson, PhDProfessor in the Practice of Finance Emeritas at Yale School of Management
Michael Kitces, CFP, CLU, ChFC, RHU, REBC & CASLFinancial planner, commentator, speaker, blogger, and educator
Let’s Get Started…The Need for Proper Retirement Planning
with the right strategies…with the right process
…with the right help
Reason #1…Because we’re living
longer.
Reason #2…Because “funding burden” is on us.
It is our responsibility
1 https://www.ssa.gov/policy/docs/ssb/v70n3/v70n3p1.html
2https://www.planadviser.com/mere-16-fortune-500-companies-offer-db-plan/
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Retirement funding used to come from a combination
of defined benefit pension and Social Security.1
In 1998, 59 percent of Fortune 500 companies
offered a defined benefit plan, or pension.2
By 2017, that figure had dropped to 16 percent.2
61% of us baby
boomers fear running
out of money more
than they fear death.
-Allianz Retirement Survey, 2009
Reason #3…To quelch our fears.
Reason #4…To understand our
income needs.
However, 81% of us
don't know how
much money we
need to retire.
-Age Wave/Merrill Lynch, "Finances in
Retirement: New Challenges, New
Solutions," 2017
Reason #5…To create a bigger nest egg.
Another 84% of us
don’t have a written
retirement plan.
-TransAmerica Retirement Survey of
Workers, 2016
Reason #6…To control our behaviors.
Everyone has the temptation to chase returns and make uninformed, knee-jerk reactions as the
volatile markets move up and down. In fact, these behaviors have been proven in numerous studies to
negatively impact portfolios over the long term.
The Dalbar Study
Challenges Unique to Women
Retirement Challenges Unique to Women
• Life Expectancy
• Earnings Gap
• Career Breaks
• Retirement Savings Gap
• Greater Likelihood of Living Alone
• Tendency to Invest Too Conservatively
• Healthcare Costs
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Life Expectancy
33
Women tend to live longer than men, which creates more years in retirement in which they must generate income.
• 70 percent of those ages 85+ are women according to U.S. Census Bureau.*
• According to the Social Security Administration:**
• The average man turning 65 today can expect to live to age 84.3.• The average woman turning 65 today can expect to live to age 86.6.• That’s on average an additional 27 months in retirement that women must
plan for.
*https://www.ssa.gov/planners/lifeexpectancy.html **https://www.census.gov/prod/2014pubs/p25-1140.pdf
According to the Society of Actuaries:*
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65-Year-Old Man 65-Year-Old Woman
50% Chance 87 90
25% Chance 92 96
*At least one surviving spouse
*https://www.fidelity.com/viewpoints/retirement/longevity
Life Expectancy
Earnings Gap
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Women who work full-time earn, on average, about 82% of what men earn
Impacts savings, Social Security retirement benefits, and pensions
Increased vulnerability to unexpected economic obstacles: job loss, divorce, single parenthood, illness, loss of spouse
Source: U.S. Bureau of Labor Statistics, Women in the LaborForce: A Databook, November 2017
Women More Likely toTake Career Breaks for Caregiving
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Lost income and employer benefits
Potentially lower Social Security retirement benefit
Economic vulnerability in event of divorce or a spouse’s job loss
Possible difficulty finding a comparable job when
Re-entering workforce
Flexible schedules can affect salary and career advancement
*http://www.nasdaq.com/article/men-vs-women-risk-aversion-cm297364
Retirement Savings GapStart Saving Later & Save Less
37
• According to a Vanguard study, men have 50 percent higher balances in their retirement plans than women.*
• Even though women are 11 percent more likely to participate in a retirement plan than men.
This imbalance has created a retirement savings gap between men and women.
*https://institutional.vanguard.com/VGApp/iip/site/institutional/researchcommentary/article/InvResWomenVsMenDCPlans
• According to the Department of Labor, women are more
likely than men to work in part-time positions with no
access to a retirement plan.*
• Also according to DoL, women are more likely than men to
interrupt their careers to care for kids or family.**
Why Is There a Retirement Savings Gap?
38
*https://www.dol.gov/ebsa/publications/women.html**https://obamawhitehouse.archives.gov/issues/equal-pay***https://www.cnbc.com/2019/04/02/heres-how-much-men-and-women-earn-at-every-age.html
Women are more likely to live alone in retirement than men.
Likelihood of Living Alone
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• For women ages 75+, only 32 percent live with a spouse
Heightened Risk Aversion
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• A BlackRock study of 4,000 investors found that women on average hold more conservative investments than male investors.*
• A conservative approach can sometimes be a good thing, but growth is also important.
• Being too cautious could prevent the type of growth needed for the amount of retirement income desired.
*http://www.nasdaq.com/article/men-vs-women-risk-aversion-cm297364
Impact of Health-Care Costsin Retirement
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Higher health-care expenses in retirement
Surviving spouse may have to cope with depleted savings (typically women)
57% of women over age 65 will need long-term care
Average monthly cost of nursing home = $6,844.
Sources: US Department of Health and Human Services, Long-Term Services and Supports for Older Americans: Risks and Financing Research Brief,February 2016; longtermcare.gov
In Summary…
Speaking of Directions…It’s IMPERATIVE that women, especially, have a plan that addresses
these challenges with an efficient & sustainable retirement income!
This might not be the best plan for us women…
Seriously…
“Those who have a written retirement plan have a
nest egg 445% bigger than non-planners.”
-HSBC, Future of Retirement, 2013
Let’s have Brian tell us how to create and implement the right plan.
The Right Plan Answers…
How to get more from what you have?
When is retirement feasible?
How you’ll support your desired lifestyle?
How long your money will last?
How you’ll meet the gap between expenses & income?
How you’ll protect your nest egg?
What legacy you’ll leave?
To create the right plan, you’ll need to change your ideas, beliefs and mindset in retirement.
Write this down:
• Distribution phase of life is different than accumulation phase• It requires different strategies and specialized help• Most advisors have managed investments, not retirement
planning
The Right Retirement Plan is More Than a 401(k) or an Investment Strategy
“Most advisors concentrate solely on managing investments. They don’t incorporate all the intricate retirement strategies that must be utilized to dramatically increase the probability
of a retiree’s success.” - Wade Phau, PhD, Retirement Researcher
The research backs this up…
Morningstar Study – Proper strategies can add 1.59% equivalent yield
Vanguard Study – Proper strategies can add 3% or more equivalent yield
Envestnet Capital Study – Proper strategies can add 3% or more equivalent yield
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The research backs this up…
Alpha, Beta, and Now…GammaDavid Blanchett, CFA, CFP® Head of Retirement Research, Morningstar Investment Mgt
Paul Kaplan, Ph.D., CFA Director of Research Morningstar Canada
August 28, 2013
Morningstar Executive Summary
Using Monte Carlo simulation, we estimate a retiree can expect to generate
22.6% more in certainty equivalent income using a Gamma-efficient
retirement income strategy when compared to our base scenario…
This addition in certainty-equivalent income has the same impact on expected
utility as an annual arithmetic return increase of +1.59%
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The research backs this up…
Alpha, Beta, and Now…Gamma
Morningstar research estimates a retiree can expect to generate 22.6%
more income from a Gamma efficient income strategy
What does this mean for a retiree???
Investment only portfolio generating annual income of $60,000.
Utilizing a Gamma Strategy can generate $ 73,560. or 22.6% more income
Additional annual income generated: $13,560.
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The Right Retirement Plan …Incorporates Multi-Discipline Retirement Strategies (MDRS)
Income Distribution
Investment Management
Tax Efficiency
Home Equity
Risk Management
Estate Planning
The Right Retirement Plan…Relies on sophisticated, technology-based assessments to see what
you’ve got, what you need and how to make it as efficient as possible
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Don’t Let Procrastination, the Media, Confusion or Bias Get in the Way of Planning
Procrastination (#1 reason people don’t have a plan)
Everyone puts off things that make them feel uncomfortable (like getting that root canal) or things they don’t understand
Listening to naysayers, media hype, misinformation
Let the data & reasoning guide you
Biased opinions from industry silos
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Speaking of Siloes & the Media....Siloed Financial Services Industry
CPAs Prepare Taxes – Typically focus
on tax returns NOT tax planning
Insurance Agents – Typically focus on
annuities & life insurance
Investment Advisors - Typically focus
on traditional investments
Extremism in Different Siloes Can Harm
Your Retirement
• Insurance Industry Zealots – “You Could Lose all your
money in the market overnight.” Wealth Beyond Wall Street
• Investment Industry Zealots – “Insurance and Annuities
are overpriced and sold by commissioned salespeople
who are out to rob you.” Ken Fisher
Siloed, Biased and Ignorant Beliefs Can
Hurt You. Beware of such fear tactics!
Extremism
Extremism passionately focuses on one belief and
discredits opposing beliefs
• Extremisim Inpacts our World
• Religion, Politics, or Finances
• DOL Fiduciary Rule
• Putting the “best interetst” of clients first
• Extremism “flies in the face” of the rule
• Beware of advice that promotes one strategy
• Stocks, bonds or annuities - at the expense of all others
Extremist Views Can Sabotage Your Retirement!
A Better Way…. “THE MIDDLE WAY”
“THE MIDDLE WAY is a path of moderation and wisdom
between extremes” - Buddha
THE MIDDLE WAY Retirement
Approach considers all financial
facets and tailors the plan to
individual needs
Figuring this Retirement Stuff Out Can Be Hard,
Intimidating & Confusing, but the Right Plan,
Process, Strategies and Help Can Change Your
Outcome…for the Better.
To Summarize…
Funding retirement is now YOUR RESPONSIBILITY
• Base decisions on research vs. biased rhetoric
• A written plan is critical (445% bigger nest egg)!
• Knowledge is Power
• Women face extra challenges
• Be open-minded to new ideas• Most advisors focus on investments… Retirement requires more
• The right plan incorporates Multi-Discipline Retirement Strategies
• Extremism and industry silos can harm your retirement
Build Your Plan with these 5 Steps(begin 5-10 years prior to retirement)
STEP 1: Determine Retirement Goals (lifestyle desires)STEP 2: Create Income Distribution Plan
• Determine any Retirement Income Gapo Identify retirement expenses & guaranteed income sources
• Fill the Income Gap o Identify other income sources, savings & investmentso Create an efficient & sustainable retirement paycheck
• Big 5 strategies• Safe withdrawal rate
STEP 3: Create Income Protection Plano Healthcare/Medicare, long term care & life insuranceo Estate planning
STEP 4: Pull it All Together: Retirement Efficiency AssessmentSTEP 5: Get Reliable Guidance
Step 1: Determine Your Retirement Goals
Living in RetirementRetirement is more than just money
Freedom to travel, pursue hobbies
Ability to live where you want (e.g., in current home, vacation home)
Opportunity to provide financially for children or grandchildren
It’s important to take the time to determine you
(and your spouse’s “why” in retirement)
Living in RetirementRetirement is more than just money
Fit to Retire (1 year to retirement)
2000 hours annually (40 hrs/week x 50 weeks/yr)
More than Money Exercises
Determine your passion
Build Your Plan with these 5 Steps
STEP 1: Determine Retirement Goals (lifestyle desires)STEP 2: Create Income Distribution Plan
• Determine the Retirement Income Gapo Identify retirement expenses & guaranteed income sources
• Fill the Income Gap o Identify other income sources, savings & investmentso Create an efficient & sustainable retirement paycheck
• Big 5 strategies• Safe withdrawal rate
STEP 3: Create Income Protection Plano Healthcare/Medicare, long term care & life insuranceo Estate planning
STEP 4: Pull it All Together: Retirement Efficiency AssessmentSTEP 5: Get Reliable Guidance
Annual income
needed in retirement
for expenses
Annual income from guaranteed
sources
Determine Your Expenses
Determine Your Guaranteed Income Sources
Determine any Income Gap
Fill the Gap
Income Distribution PlanHow Much Do You Need To Retire?
Determine the Gap
Fill the Gap (create your retirement paycheck) with other income sources, savings & investmentsAnd the right strategies.
Step 2: Create Your Income Distribution Plan
62% of people have not sought adviceon how to turn savings into retirement income
The Number One
Goal of Retirement
(besides health) …
…to Make Sure Your Money
Lasts as Long as You Do (while living your desired lifestyle)
The oldest person ever whose age has been verified
is Jeanne Calment (1875–1997) of France, who died at the
age of 122 years.
Source: REUTERS
To do this effectively, you’ll need
an “Efficient & Sustainable”
retirement income for life.
You may also need an attitude adjustment or at least an open mind (and a commitment to getting educated)…
The distribution phase of life requires COMPLETELY different strategies from the accumulation phase
Creating an Efficient and Sustainable Retirement Income for Life
What does this mean to you???• Having more spendable in your pocket income and enjoying a
better, more robust retirement with your friends and family
• Leaving more on to your loved ones (children or grandchildren)
• Just knowing you’re getting the most from what you’ve got and inner peace knowing you’re all set
Annual income
needed in retirement
for expenses
Annual income from guaranteed
sources
Determine Your Expenses
Determine Your Guaranteed Income Sources
Determine any Income Gap
Fill the Gap
Income Distribution PlanHow Much Do You Need To Retire?
Determine the Gap
Fill the Gap (create your retirement paycheck) with other income sources, savings & investmentsAnd the right strategies.
Create your retirement budget
• A retirement budget is an estimate of yourfuture expenses
• Serves as a roadmap for your savings andyour strategy
• Nearly 60 percent of Americans don't use a budget*
*https://money.cnn.com/2016/10/24/pf/financial-mistake-budget/index.html
Determine Your Retirement Expenses
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General guidelines (e.g., you’ll need 60% to 90% of pre-retirement income) are easy but not always helpful
Think about what expenses will change (e.g., mortgage may decrease, health-care costs may increase)
Include costs for special retirement pursuits (e.g., travel, hobbies)
How to Project Retirement Expenses?
Fixed Expenses – The bills you have to pay. Mortgage Credit card payments Utilities Food
Discretionary Expenses – The “fun” expenses. Dining out Shopping Travel
Add these expenses together to get an estimate of your total monthly and annual spending (i.e. your budget).
Account for all Your Potential Expenses
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Annual income
needed in retirement
for expenses
Annual income from guaranteed
sources
Determine Your Expenses
Determine Your Guaranteed Income Sources
Determine any Income Gap
Fill the Gap
Income Distribution PlanHow Much Do You Need To Retire?
Determine the Gap
Fill the Gap (create your retirement paycheck) with other income sources, savings & investmentsAnd the right strategies.
How Much Income Can You Expect in Retirement?
Source: Fast Facts & Figures About Social Security, 2017, Social Security Administration
Determine Your Guaranteed Income Sources
1. Pensions Plans• Defined Benefit
2. Social Security
3. HECM Loans Tenure Offer
4. Annuity Income SPIA’s & GMIB’s
Pension Plans (Defined Benefit Plans)
Pay a guaranteed monthly income for a specified period or lifetime
Corporation or Government entity is responsible for guaranteed payments to participants
Defined Benefit Pension Plans
Typical Payout Options – Pay a guaranteed monthly income for a specified period or lifetime
Lifetime Income Only
Maximum payout option
Payments cease at the death of the pension owner
Lifetime Income with Joint & Survivor option
Reduced payout option
Payments continue to the spouse or chosen beneficiary
Many other options may be available
1. Pensions Plans Defined Benefit
2. Social Security
3. HECM Loans Tenure Offer
4. Annuity Income SPIA’s & GMIB’s
Determine Your Guaranteed Income Sources
Income That Will Last a Lifetime
Social Security offers a guaranteed income stream along with longevity protection, spousal protection, and even some inflation protection.
Old-Age, Survivors, and Disability Insurance (OASDI) Program
• Signed into law in 1935 during the Great Depression (FDR)
• Social Security is the single largest source of retirement income for 62% of retirees
• Social Security accounts for 33% of the average Americans retirement income.
Source: Social Security Administration, 2017
History Behind America’s Retirement Safety Net
Social SecurityHow is Your Benefit Calculated?
Your highest 35 years of earnings are indexed then averaged, and a formula is applied to determine your benefit at full retirement age.
Your Social Security Statement
Visit ssa.gov/myaccount/
to create a my Social Security
account and view your
Social Security Statement online.
Understanding COLAs
After factoring in the 2019 COLA, the average monthly benefit for a retired worker will be $1,461.
Source: Social Security Administration, 2018
Years COLASince 1975 3.7% average
2009 5.8%
2010 0%
2011 0%
2012 3.6%
2013 1.7%
2014 1.5%
2015 1.7%
2016 0%2017 0.3%2018 2.0%
2019 2.8%
Benefits are based on the age when you claim them.
Earliest age: 62*
Full retirement age: 66 to 67**
Latest age: 70
*Surviving spouses can claim survivor benefits at age 60.
**Full retirement age varies depending on year of birth.
When Can You Claim Social Security Retirement Benefits?
Full retirement age Age 62 benefitYear of birth Age 70 benefit
1943–54 66 75.00% 132.00%
1955 66 and 2 months 74.17% 130.67%
1956 66 and 4 months 73.33% 129.33%
1957 66 and 6 months 72.50% 128.00%
1958 66 and 8 months 71.67% 126.67%
1959 66 and 10 months 70.83% 125.33%
1960 & later 67 70.00% 124.00%
How Does Filing Early or Later Affect the Monthly Benefit?
ToddBirth year: 1956 Full retirement age: 66 + 4 months
Monthly Annually
Age 62 benefit (73.33%) $1,467 $17,604
Full retirement benefit (100%) $2,000 $24,000
Age 70 benefit (129.33%) $2,587 $31,044
MarianBirth year: 1960 Full retirement age: 67
Monthly Annually
Age 62 benefit (70%) $1,680 $20,160
Full retirement benefit (100%) $2,400 $28,800
Age 70 benefit (124%) $2,976 $35,712
These hypothetical examples are used for illustrative purposes only. Actual benefits and results will vary.
How Claiming Age Affects Monthly and Annual Benefits
By delaying, you might increase not only your monthly benefits but also your lifetime benefits, depending on how long you live.
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$700,000 Age 70 Maximum monthly benefit:$2,640
Age 66 Full monthly benefit (PIA):$2,000
Age 62 Reduced monthly benefit:$1,500
62 66 70 74 78 82 86 90
$633,600$576,000$504,000
$350,000
$0
Assumes $2,000 PIA at age 66.
This hypothetical example is used for illustrative purposes only. Actual benefits and results will vary.
How Claiming Age Affects Lifetime Benefits
Social Security tax is assessed at 6.2% for employers and employees Earning threshold is $132,900 Maximum tax of $8,329
Social SecurityMaximum taxable Earnings
Social SecurityDo You Plan to Continue Working?
Under fullretirement age?
Reached fullretirement age?
Earnings from a job will reduce your Social Security benefit.
Earnings from a job will not reduce your Social Security benefit.
Social SecurityHow Working Affects Benefits?
$1 reduction for every $2 that earnings exceed annual limit-- $17,640 in 2019
Before full retirement age
Year you reach full retirement age
At or after full retirement age
$1 reduction for every $3 that earnings exceed annual limit--
$45,360 in 2019
Earnings will not affect your benefit
Social SecurityWill Your Benefit Be Taxable?
Provisional Income = adjusted gross income + nontaxable income + ½ of Social Security benefit income
Up to 50% of benefit may be taxable if your combined income* is:
$25,000 to $34,000 and you file as single
$32,000 to $44,000 and you file as married filing jointly
Up to 85% of benefit may be taxable if your combined income* is:
Over $34,000 and you file as single
Over $44,000 and you file as married filing jointly
Social SecuritySurvivor’s Benefits
Surviving spouse generally receives the greater of the retirement benefit the worker was receiving or his or her own benefit
Survivor’s benefits may be payable as early as age 60, subject to reduction
Social SecurityThe Impact of Divorce
As a divorced spouse, you may be entitled to Social Security benefits based on ex’s work record if:
● You were married for at least 10 years
● You have attained the minimum age required
● You are unmarried* (it doesn’t matter whether ex has remarried)
● Your own worker benefit would be lower than ex-spouse’s benefit
*Remarriage after reaching age 60 does not affect eligibility for survivor benefits if ex is deceased.
Social SecurityThe Future of Social Security
Over the years, we’ve worked hard and contributed into the Social Security system. The question is, when we retire, will there be any money left?
Demographic TrendsIn 1945, the ratio of workers to Social Security beneficiaries was 41.9 to 1*
In 2013, the ratio of workers to Social Security beneficiaries was 2.8 to 1*
In 2035, the projected ratio of workers to Social Security beneficiaries will be 2.1 to 1By 2034, only 79% of scheduled annual benefits will be funded*
*Social Security Administration, 2014 OASDI Trustees Report.
Social SecurityThe Future of Social Security
What Can You Expect?
Restructuring Social Security always seems to be on the political agenda. Possible future changes may include:
• Delaying full retirement age
• Reducing cost of living increases
• Modifying the benefit formula to reduce basic benefits
• Increasing payroll taxes
Social SecuritySocial Security Timing Strategy
Sophisticated Social Security Analysis
Determine maximum Income
Assess breakeven analysis
Integrate benefit with all retirement assets to determine the highest probability of portfolio survival
1. Pensions Plans Defined Benefit
2. Social Security
3. HECM Loans Tenure Offer
4. Annuity Income SPIA’s & GMIB’s
Determine Your Guaranteed Income Sources
HECM Loans (Reverse Mortgages)
Can I tap into my home equity to support myself in retirement?
Must be 62 Years of age
Typically need 60% equity to qualify
Owners must maintain the home as well as pay property taxes
HECM Loans (Reverse Mortgages)
How to Utilize a RM?
Line of Credit – Can create an increasing line of credit which can be utilize as a tax-free source of funds
Tenure Payment – Can create a tax-free guaranteed income payment for life
Eliminate Monthly P&I Payment – Can eliminate the P&I payments based upon your equity balance
HECM Loans (Reverse Mortgages)
How to use Reverse Mortgages to Secure Your RetirementBy Wade Pfau, Ph.D, CFA,February 27, 2017
“Though reverse mortgages have long held a bad reputation, research and Public policy in recent years are shedding a new light on their potential uses in retirement.”
“Financial planning research has shown that coordinated use of a reverse Mortgage starting earlier in retirement outperforms waiting to open a reverse mortgage as a last resort option once all else has failed.”
NOTE: It is imperative to calculate the effect of a reverse mortgage on each individuals personal situation to determine the negative or positive effect on the overall retirement outcome. Each retiree’s situation and asset levels different and outcomes will vary based upon these nuances.
HECM Life of Credit Growth Rate
The Growth Rate is always 1.25% above the initial interest rate (IIR), which is the annual rate that interest accrues on the loan balance.
For example, if the IIR on the loan balance is 3.75% then the growth rate on the credit line would be 5.00% (3.75% + 1.25%)
As long as at least one borrower is living in the home and paying the required property charges (property taxes, homeowner’s insurance, etc.)
The line of credit is always guaranteed to grow without limit
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Prudent Use of Home Equity
HECM Outstanding Loan Balance
Any outstanding loan balance accrues internally and are debited against home equity
•Will be repaid upon death or sale of the property
•Any equity is retained by the owners or the estate
Non-recourse Loan – If the loan amount exceeds the home’s value, the lender cannot go after the borrower, heirs or the estate.
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Prudent Use of Home Equity
1. Pensions Plans Defined Benefit
2. Social Security
3. HECM Loans Tenure Offer
4. Annuity Income SPIA’s & GMIB’s
Determine Your Guaranteed Income Sources
Determine Your Guaranteed Income Sources
All Annuities Offer
Accumulation
(Fixed or Variable)
Guaranteed Income Stream
(SPIA or GMIB)
Add to your Guaranteed Income SourcesImmediate Income Annuities
Single Premium Immediate Annuity (SPIA)
Purchase Options Purchase with a Lump sum payment (NQ or Qualified) Convert any annuity from accumulation to a SPIA
Guaranteed Income Payout Options Lifetime income Lifetime Income with 10 Yr Certain Lifetime Income with 20 Yr Certain Lifetime income with survivor options Plus many more options
Annual income
needed in retirement
for expenses
Annual income from guaranteed
sources
Determine Your Expenses
Determine Your Guaranteed Income Sources
Determine any Income Gap
Fill the Gap
Income Distribution PlanAfter determining the gap, we move on to filling the gap
Determine the Gap
Fill the Gap (create your retirement paycheck) with other income sources, savings & investmentsAnd the right strategies.
END SECTION 1