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Retirewise
®
A financial education workshop series
1
Welcome!
Welcome to Retirewise® – an award-winning nancial education workshop
series. In its 14th year, Retirewise has been oered to more than 2,700
1
companies in all 50 states. Our surveys consistently show that 99%
2
of
employees would recommend Retirewise to their colleagues.
Let us help you sort it all out
By attending the Retirewise workshop series,
you will learn a lot. Each session builds on one
another and takes you through the dierent
stages of nancial and retirement planning.
From investment basics and budgeting to tax
strategies and estate planning, there’s
something for everyone, regardless of your
age or where you are in your career.
At the end of the series, we hope you’ll feel:
•
More informed about personal nance and
retirement planning
•
Better prepared to make nancial decisions
•
Condent, in control, and ready to take action
Get your questions answered
This workbook includes important activities
and concepts that are covered in the Retirewise
workshops. During the program, you will have
the opportunity to ask any questions and hear
from your co-workers. You can also sign up for
a personal consultation with the presenter or a
member of their team. There is no cost and no
obligation. It is part of the nancial education
program oered by your employer.
We know your time is valuable, and thank you for
participating in the Retirewise workshop series.
Remember, it’s never too early or too late to get
a better nancial plan in place.
1. Retirewise workshop data results
2. 2020 Retirewise satisfaction survey results
RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES2
Anancial education
workshop series
5 My nancial checkup checklist
6 Budget worksheet
7 How to nd money for your
emergency fund?
8 Get to know your credit score
10 Envision your retirement
12 Meet your match — literally
13 Leverage the power of 1%
14 Rule of 72: Estimate how long will
it take to double your money?
15 How are things taxed?
16 When does a Roth make sense?
17 How do taxes and ination
impact your investment return?
18 Key action steps
21 What's the Rule of 25?
22 e value of a diversied approach
23 Annual index returns 2009 – 2020
24 Determine your risk tolerance
26 Let dollar-cost averaging work
for you
27 Key action steps
Building the
Foundation
1
Creating and
Managing Wealth
2
3BUILDING THE FOUNDATION
Establishing
Your Retirement
Income Stream
3
29 Age-related tax and nancial
planning milestones
30 Order and understand your Social
Security statement
31 e benets of waiting
32 Match sources of retirement
income with expenses
33 Do you have a retirement income
gap?
34 Key action steps
37 Common types of life insurance
38 Life insurance planning over your
lifetime
39 Consider your insurance needs
40 Insurance plan worksheet
41 How much life and disability income
insurance is enough?
42 Long term care costs in your state
43 Separate long term care myths from
realities
44 Take time to look at additional benets
45 Estate planning must-haves
46 Five reasons an estate plan is for you
48 What else can get in the way of
calculating your estate taxes?
49 Documents you need when your child
turns 18
50 Understanding Health Savings
Accounts (HSAs)
51 Key action steps
52 Are you ready to take action?
Making the Most
of What You Have
4
RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES4
1
Please note: Throughout our workshop series we use the term spouse/partner to reect the various domestic arrangements individuals may
have. Federal and tax legislation may vary based on your particular arrangement.
5 My nancial checkup checklist
6 Budget worksheet
7 How to nd money for your emergency
fund?
8 Get to know your credit score
10 Envision your retirement
12 Meet your match — literally
13 Leverage the power of 1%
14 Rule of 72: Estimate how long will it
take to double your money?
15 How are things taxed?
16 When does a Roth make sense?
17 How do taxes and ination impact your
investment return?
18 Key action steps
Building the
Foundation
Building the Foundation sets the stage for
the “why” and “how” of the nancial and
retirement planning process. We’ll talk
about money, but also about what your
ideal retirement might look like and what
you need to think about to get you there.
5BUILDING THE FOUNDATION
Mynancial checkup checklist
It’s never too early or late to start knocking o these tasks that can lead to your nancial success.
Even if you have planned, it is essential to review this checklist often, so you are more prepared
to make important decisions as your lifestyle and nancial circumstances change.
Building the Foundation
Have a budget and understand monthly expenses categorized as “needs” and “wants”
Know my marginal tax bracket and if a pre-tax or after-tax retirement plan contribution is best for me
Understand how tax diversication may help me keep more of what I earn
Max out 401(k) or 403(b) contributions, or at least enough to get the company match
How to use the “Rule of 72” to help understand the power of compounding in savings eorts
Determine if Roth accounts and an HSA (if available) t into the plan
Understand the meaning and importance of tax diversication
Creating and Managing Wealth
Get a basic idea of how big my retirement savings will have to be by using the “Rule of 25”
Complete a risk tolerance assessment to help identify an asset allocation
that reects my investment objectives
Review investments regularly to make sure they are appropriately diversied
Establishing Your Retirement Income Stream
Order my Social Security statement and understand how to maximize benets
Think about how my expenses will change in retirement
Determine my dependable income sources in retirement and what percent of my income will,
and will not, be guaranteed
Making the Most of What You Have
Ensure that all beneciary designations are correct, especially on life insurance, 401(k)s, 403(b)s,
and IRAs since named beneciary(ies) supersede a will
Determine how much life and disability income insurance is needed
Take the time to look at all additional benets oered by my employer
Have the ve basic elements of an estate plan, including a will, advanced healthcare directives,
nancial and healthcare powers of attorney and a digital duciary
RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES6
Current Retirement
Needs Wants Needs Wants
Housing and related expenses
Rent / mortgage
Real estate association / maintenance fees
Property taxes
Home insurance
Heat / AC / electric
Water / sewer / garbage
Cable / internet / phone
Home maintenance and repairs
Other
Housing total:
Transportation expenses
Car payments
Car insurance
Transportation (gas, parking, rideshare)
Other car-related costs (registration, license)
Other
Transportation total:
Personal expenses
Groceries
Entertainment / vacations
Restaurant / takeout
Personal care (hair, nails)
Clothing
Childcare
Pet insurance / care
Gym memberships / hobbies
Monthly subscriptions (Netix, Hulu, Spotify)
Gifts
Charitable donations
Education
Credit card(s) / Personal loan(s) / Student loan(s)
Other
Personal total:
Medical expenses / insurance premiums
Medical (copays, prescriptions)
Eye care (glasses, contacts, exams)
Health insurance
Dental insurance
Life insurance
Long term care insurance
Disability income insurance
In-home care services
Other
Medical / Insurance total:
Savings
Emergency fund (checking / saving)
Retirement Plan (401k / Roth / Other)
Other
Savings total:
Total monthly expenses:
Budget worksheet
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
7BUILDING THE FOUNDATION
How to nd money for your
emergency fund?
Get paid
•
Treat reimbursements from your Flexible Spending Account (FSA) and Dependent-Care FSA as a
windfall – the money has already been spent.
•
Use MissingMoney.com to search for unclaimed property held in state treasury departments.
•
Get a no-fee credit card that pays points that can convert to cash (but make sure you pay o the
balance in full).
•
Increase your tax withholding from your paycheck which will generally result in a larger tax refund.
Spend less
•
Manage debt payments – never pay less than the minimum but if they are manageable, consider
50% toward extra debt payments and 50% towards emergency fund.
•
Take advantage of historic low interest rates and renance your mortgage and other loans (auto,
personal or student).
Save more
•
Build up your Health Savings Account (HSA) if you have one and pay for regular out-of-pocket
expenses with other money.
•
Increase deductibles on your auto and homeowners policies and eliminate collision coverage on
older cars to lower your premiums.
•
Don’t spend your raise.
RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES8
Get to know your credit score
What it is and why it matters
Virtually all lenders use your credit score as a factor when you apply for credit. Whether you are
applying for a credit card, a mortgage, a car loan, or renancing your student loans, your score will
more than likely come into account.
Aim for 740 or higher
Your FICO* credit score can range from 300 to 850 and can inuence what credit is available to
you, how much interest you’ll pay, and even how much you pay for utilities and car insurance.
Credit Score Rating % of people Impact
300-579
Very Poor 16% Applicants may be required to pay a fee or deposit
or may not be approved for credit at all.
580-669
Fair 18% Scores in this range are considered to be subprime
borrowers.
670-739
Good 21% Only 8% of applicants in this score range are likely
to become seriously delinquent in the future.
740-799
Very Good 25% Applicant with scores here are likely to receive
better than average rates from lenders.
800-850
Exceptional 20% Scores in this range are at the top of the list for the
best rates from lenders.
Experian.com 2021
The most widely used credit scores are FICO Scores created by Fair Isaac Corporation.
•
Payment history
•
Amounts owed on credit and debt
•
Length of credit history
•
Type of credit used
•
New credit
How scores
are calculated
9BUILDING THE FOUNDATION
Check your score
You are entitled to one free credit report every 12 months from each of the three reporting
agencies — Experian, TransUnion or Equifax. You can order your credit report online from
annualcreditreport.com or by calling 877-322-8228. After you get your report always check it
for accuracy — especially if you are a victim of identity theft, trying to repair credit, or applying
for a major loan.
Remember:
Even an unpaid library book fine of $16 can affect your credit.
Improve your score
Once you know your score and have your credit reports in hand, there are steps you can take
to improve your credit score.
•
Make all your loan payments on time and for the appropriate amount. Even one late payment
can aect your score.
•
Avoid carrying large balances on your credit cards and stay below 30% of the limit.
•
Pay o your debts which will generally improve your score within a few months.
Factors that aect your credit score
•
The longer a credit account has been open and in good standing, the better it reects on
your credit score.
•
A home loan has a more positive impact on your credit score than a credit account with
some nancing companies.
•
Limit the number of times you apply for credit because frequent credit applications may
depress your score.
RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES10
Envision your retirement
Place
As you look ahead to retirement and where
you will live, make sure your vision oers
you the right climate, activity, transportation,
healthcare, safety, proximity to family, and
impact on taxes.
People
It’s important to consider how and with whom
you will spend your time in retirement.
1. Given your resources, lifestyle, and your
vision of retirement, where would you
like to live?
2. Do you anticipate your cost of living to
change?
a) More
b) Less
c) No change
d) I don’t know
3. What type of living arrangement do
you prefer?
a) House
b) Apartment/Condo
c) 50+ Community
d) Living with family
e) Other
1. Have you thought about the importance of
having a support system in place, such as
family and friends?
a) Yes
b) No
2. If you plan on being nancially responsible
or acting as a caregiver for any individual
during retirement, what impact do you
think that will have on you and your goals?
3. Do you, or any of your family members,
have any health concerns or history that
may impact your lifestyle in the future,
including the need for long term care?
a) Yes
b) No
c) I don’t know
11BUILDING THE FOUNDATION
Work
For many, working, volunteering or going to
school during retirement is part of the plan.
Activity
A signicant benet of retirement is that you
are no longer “on the clock.” But this can be a
mixed blessing.
1. If necessary, would you rather work
longer, save more now, or spend less in
retirement?
a) Work longer
b) Save more now
c) Spend less in retirement
2. At what age(s) do you and your spouse/
partner (if applicable) intend to transition
into retirement?
3. Do you plan to continue working in
retirement?
a) Yes, part-time
b) Yes, in a new career
c) No
d) Undecided
4. If you intend to work or volunteer, what
would you imagine your main reason to
do so?
a) Additional income and maintain benets
b) Social interaction and structure
c) Pursue other interests
d) Start a business
1. How will you spend your time in
retirement?
a) Continue working, full or part-time
b) Take classes toward a degree or otherwise
c) Pursue old or new hobbies
d) Travel
e) Visit family and friends
f) Volunteer
g) Teach
h) Take up a new sport or join a tness group
RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES12
Meet your match — literally
When it comes to retirement planning the very rst place you should start is with your employer
plan. If available, at the very minimum, meet any match your employer provides on contributions
to your 401(k) or other retirement plan.
How does the employer 401(k) match work?
Example: Company match is 50% of employee salary contribution up to a maximum of 3%. For
every $1 put into the 401(k), this employer will put in 50¢ up to a maximum of 3% of the
annual salary. If the annual salary is $50,000, 3% of that salary is $1,500. If the employee
contributes $1,500, this employer will add another $750.
company
match
employer
contribution
salary salary
contribution
( $50,000 x 3% ) x 50% = $750
Your company
match
Your employer
contribution
Your salary Your salary
contribution
( $ x % ) x % = $
This employee has earned a 50% return ($750) on a $1,500 contribution.
0
13BUILDING THE FOUNDATION
Leverage the power of 1%
Ryan maintains
6% contributions
throughout his
career
Tanya increases
contribution by
1% each year
until she is
contributing 15%
of her annual
income
Meet Tanya and Ryan.
Both have a starting salary of $50,000.
Both contribute 6% of their salaries to retirement plan
accounts.
Both receive a 3% salary increase each year.
$757,502
After 30 years
After 30 years
$351,760
$50,000
Remember, every small change you make can add up to a big dierence.
Assumes 6% average annual rate of return, monthly salary deferral and monthly compounding of earnings. Hypothetical examples of
mathematical compounding is used. Fees, taxes and expenses are not considered and would reduce the results if shown. Actual results may vary.
RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES14
Here’s a simple way to illustrate the power of compounding in your retirement and
nancial planning eorts.
You can use the Rule of 72 to:
•
Determine how many years it will take to double your money at various rates of return.
•
Estimate the return you will have to earn to double your money within a specic time frame.
Rule of 72 – How long will it take
to double your money?
1.
The Rule of 72 is based on a hypothetical illustration and is not a guarantee of future performance.
This illustration does not represent the performance of any specic product and there is no assurance
that investments would double or triple within any specic time frame.
Annual
interest rate %
72 ÷ 10
10% 7.2
72 ÷ 9
9% 8.0
72 ÷ 8
8% 9.0
72 ÷ 7
7% 10.3
72 ÷ 6
6% 12.0
72 ÷ 5
5% 14.4
72 ÷ 4
4% 18.0
72 ÷ 3
3% 24.0
Years to
double
72
annual
interest
rate %
number of
years to
double value
1
=÷
Annual interest rate %
15BUILDING THE FOUNDATION
How are things taxed?
Key Takeaways:
•
When calculating capital gains taxes, the holding period matters. Long-term investments are
subject to lower tax rates.
•
The tax rate on long-term (more than one year) capital gains is 0%, 15%, or 20%, depending on
taxable income and ling status.
•
Interest income from investments is generally treated as ordinary income for federal tax purposes.
•
The initial cost basis is the amount paid for the investment when purchased.
•
Capital gains distributions from a mutual fund or exchange-traded fund (ETF) are taxed as
long-term capital gains, no matter how long the individual has owned shares of the fund- which
means a tax rate of 0%, 15%, or 20%, depending on ordinary income tax rate.
•
Some strategies can oset capital gains with capital losses (selling an investment for less than
the purchase price) to lower their capital gains taxes.
A key part of any investment strategy is developing the right mix of short and long-term
investments. But not all investments receive the same tax treatment — some are taxed at
capital gains rate and others as ordinary income.
While it’s generally not a good idea to make an investment based solely on tax considerations,
it’s smart to know the tax consequences on any move you make.
1. Some dividends may still be taxed as ordinary income tax rates. For higher income brackets, a 3.8% Medicare surtax may result in a
maximum 23.8% rate.
2. Additional penalties may apply.
How are things taxed?
Interest income In most cases, as ordinary income
Dividends 0%- 20% depending on income
1
Capital gains
Short-term: asset held one year or less Ordinary income
Long-term: asset held for more than one year 0%-20% depending on income tax rate
Capital gains distributions from mutual funds 0%-20% depending on income tax rate
Tax-deferred investment earnings Taxed as ordinary income when withdrawn
2
RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES16
When does a Roth make sense?
Pay tax now but not later
A Roth 401(k) is the reverse of your traditional 401(k). There is no tax break up front. So your taxable
income would be higher than if you saved money in a traditional 401(k). But every dollar you withdraw
from a Roth in retirement is tax-free.
So, which way to go?
Roth IRA or 401(k) candidates generally include those who:
•
Expect a higher income and tax rate in retirement
•
Want to tax-diversify to minimize taxes in retirement
•
Have a desire to leave an income tax-free account to heirs
Like all investments, everyone’s situation is dierent. That’s why it’s important to speak with a
nancial professional to determine if a Roth is right for you.
17BUILDING THE FOUNDATION
How do taxes and ination
impact your investment return?
It’s not easy to outpace ination and taxes
Taxes and ination can put downward pressure on the growth of
your investments and savings.
With taxes, you can quantify and see the impact of taxes on your
savings and investments because, except for tax-deferred accounts,
you must pay this year after year.
With ination, no one is taking that money out every year, but the
downward impact is still there. You may think you are doing ne,
but over time ination adds up. Keeping your money in CDs or a
low-interest bank account may seem a good way to preserve your
capital, but ultimately, it diminishes purchasing power.
Source: CD is Ally Bank 6 month CD 1/2021; Ination – Bureau of Labor Statistics 1/2021
(
minus
)
=––
CD rate taxes ination real rate of return
1980
12.94%
– 3.6 0%
– 13.91%
– 4.57%
2000
1.95%
– 1. 90% – 2. 74 %6.59%
2021
– 1 .01%
– 0.0 6%.25% – 1. 2%
(
minus
)
RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES18
Key action steps
Max out my 401(k) contributions, or at least
enough to get my company match if it’s oered
Create and manage a budget and build my
emergency fund
Start saving now to take advantage of compounding
Know how taxes and ination aect my investments
19BUILDING THE FOUNDATION
20 RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES
2
21 What's the Rule of 25?
22 e value of a diversied approach
23 Annual index returns 2009 – 2020
24 Determine your risk tolerance
26 Let dollar-cost averaging work for you
27 Key action steps
Creating
and Managing
Wealth
Creating and Managing Wealth is when
we start the discussion about investments.
By choosing the right investments, in the
right amount and at the right time, you can
build a diversication strategy to protect
your money.
21CREATING AND MANAGING WEALTH
What's the Rule of 25?
The Rule of 25 is a way to estimate how much money you need to save for retirement. It assumes
a 4% annual withdrawal rate and works by calculating the annual retirement income you expect
to provide from your personal savings and multiplying that number by 25.
Let’s assume you’ve settled on a retirement budget of $100,000 a year
and Social Security, pensions, a part-time job, or other income sources
cover $30,000 of this amount, so you must cover the remaining $70,000
with your personal savings.
According to the Rule of 25, you would need to save at least $1.75 million
to be able to safely withdraw $70,000 of income in your rst year of
retirement. Remember that depending on the type of account the money
is withdrawn from, you may owe income or capital gains tax.
This concept does not account for the potential impact of reducing
purchasing power due to ination and taxes, unanticipated expenses
reducing the principal, and the possibility of outliving your money.
70,000 x 25 = $1,750,000
x 25% =
from which
to draw
4%
annually
Annual
Retirement
Income
Nest
Egg
22 RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES22
e value of a diversied approach
This chart looks a bit like the periodic table you probably
last saw in high school chemistry class. It shows the
best-performing types of investments each year from
2009-2020.
Can you see a pattern here? The pattern is that there is
not a pattern. The boxes circled represent the Small Cap
Equity index, and the performance is pretty much all over
the place.
The point is that dierent investment categories fall in
and out of favor in dierent market environments. So how
do you know which ones are best for you? The answer is
that it depends on your specic objective, risk tolerance,
and time horizon.
23CREATING AND MANAGING WEALTH
Annual index returns 2009 – 2020
Source: Callan Associate Inc., 2020
Large Cap Equity (S&P 500) measures the performance of large
capitalization U.S. stocks. The S&P 500 is a market-value weighted.
Index of 500 stocks. The weightings make each company’s influence
on the Index performance directly proportional to that company’s
market value.
Small Cap Equity (Russell 2000) measures the performance of small
capitalization U.S. stocks. The Russell 2000 is a market-value-weight-
ed index of the 2,000 smallest stocks in the broad-market Russell
3000 Index.
Developed ex-U.S. Equity (MSCI World ex USA) is an index that is
designed to measure the performance of large and mid cap equities
in developed markets in Europe, the Middle East, the Pacific region,
and Canada.
Emerging Market Equity (MSCI Emerging Markets) is an index
that is designed to measure the performance of equity markets in
26 emerging countries around the world.
U.S. Fixed Income (Bloomberg Barclays US Aggregate Bond Index)
includes U.S. government, corporate, and mortgage-backed securities
with maturities of at least one year.
High Yield (Bloomberg Barclays High Yield Bond Index) measures
the market of USD-denominated, non-investment grade, fixed-rate,
taxable corporate bonds. Securities are classified as high yield if the
middle rating of Moody’s, Fitch, and S&P is Ba1/BB+/BB+ or below,
excluding emerging market debt.
Global ex-U.S. Fixed Income (Bloomberg Barclays Global
Aggregate ex US Bond Index) is an unmanaged index that is
comprised of several other Bloomberg Barclays indices that measure
the fixed income performance of regions around the world, excluding
the U.S.
Real Estate (FTSE EPRA Nareit Developed REIT Index) is designed
to measure the stock performance of companies engaged in specific
real estate activities in the North American, European, and Asian real
estate markets.
Cash Equivalent (90-day T-bill) is a short-term debt obligation
backed by the Treasury Department of the U.S. government.
A mutual funds portfolio may differ significantly from the securities
held in the indices. These indices are not available for direct
investment, therefore, their performance does not reflect the
expenses associated with the active management of an actual
portfolio. Past performance is no guarantee of future results and
investment results and principal value will fluctuate so that shares,
when redeemed, may be worth more or less than their original cost.
Total return includes reinvestment of dividends and capital gains.
Equity
Cap
Large
-11.89%
Equity
Cap
Large
-22.10%
Equity
Cap
Large
28.68%
Equity
Cap
Large
10.88%
Equity
Cap
Large
4.91%
Equity
Cap
Large
15.79%
Equity
Cap
Large
5.49%
Equity
Cap
Large
-37.00%
Equity
Cap
Large
26.47%
Equity
Cap
Large
15.06%
Equity
Cap
Large
2.11%
Equity
Cap
Large
16.00%
Equity
Cap
Large
32.39%
Equity
Cap
Large
13.69%
Equity
Cap
Large
1.38%
Equity
Cap
Large
11.96%
Equity
Cap
Large
21.83%
Equity
Cap
Large
-4.38%
Equity
Cap
Large
31.49%
Equity
Cap
Large
18.40%
Equity
Small Cap
2.49%
Equity
Small Cap
-20.48%
Equity
Small Cap
47.25%
Equity
Small Cap
18.33%
Equity
Small Cap
4.55%
Equity
Small Cap
18.37%
Equity
Small Cap
-1.57%
Equity
Small Cap
-33.79%
Equity
Small Cap
27.17%
Equity
Small Cap
26.85%
Equity
Small Cap
-4.18%
Equity
Small Cap
16.35%
Equity
Small Cap
38.82%
Equity
Small Cap
4.89%
Equity
Small Cap
-4.41%
Equity
Small Cap
21.31%
Equity
Small Cap
14.65%
Equity
Small Cap
-11.01%
Equity
Small Cap
25.52%
Equity
Small Cap
19.96%
Equity
U.S.
Dev ex-
-21.40%
Equity
U.S.
Dev ex-
-15.80%
Equity
U.S.
Dev ex-
39.42%
Equity
U.S.
Dev ex-
20.38%
Equity
U.S.
Dev ex-
14.47%
Equity
U.S.
Dev ex-
25.71%
Equity
U.S.
Dev ex-
12.44%
Equity
U.S.
Dev ex-
-43.56%
Equity
U.S.
Dev ex-
33.67%
Equity
U.S.
Dev ex-
8.95%
Equity
U.S.
Dev ex-
-12.21%
Equity
U.S.
Dev ex-
16.41%
Equity
U.S.
Dev ex-
21.02%
Equity
U.S.
Dev ex-
-4.32%
Equity
U.S.
Dev ex-
-3.04%
Equity
U.S.
Dev ex-
2.75%
Equity
U.S.
Dev ex-
24.21%
Equity
U.S.
Dev ex-
-14.09%
Equity
U.S.
Dev ex-
22.49%
Equity
U.S.
Dev ex-
7.59%
Income
Fixed
U.S.
8.43%
Income
Fixed
U.S.
10.26%
Income
Fixed
U.S.
4.10%
Income
Fixed
U.S.
4.34%
Income
Fixed
U.S.
2.43%
Income
Fixed
U.S.
4.33%
Income
Fixed
U.S.
6.97%
Income
Fixed
U.S.
5.24%
Income
Fixed
U.S.
5.93%
Income
Fixed
U.S.
6.54%
Income
Fixed
U.S.
7.84%
Income
Fixed
U.S.
4.21%
Income
Fixed
U.S.
-2.02%
Income
Fixed
U.S.
5.97%
Income
Fixed
U.S.
0.55%
Income
Fixed
U.S.
2.65%
Income
Fixed
U.S.
3.54%
Income
Fixed
U.S.
0.01%
Income
Fixed
U.S.
8.72%
Income
Fixed
U.S.
7.51%
Equity
Market
Emerging
-2.61%
Equity
Market
Emerging
-6.16%
Equity
Market
Emerging
55.82%
Equity
Market
Emerging
25.55%
Equity
Market
Emerging
34.00%
Equity
Market
Emerging
32.17%
Equity
Market
Emerging
39.38%
Equity
Market
Emerging
-53.33%
Equity
Market
Emerging
78.51%
Equity
Market
Emerging
18.88%
Equity
Market
Emerging
-18.42%
Equity
Market
Emerging
18.23%
Equity
Market
Emerging
-2.60%
Equity
Market
Emerging
-2.19%
Equity
Market
Emerging
-14.92%
Equity
Market
Emerging
11.19%
Equity
Market
Emerging
37.28%
Equity
Market
Emerging
-14.57%
Equity
Market
Emerging
18.44%
Equity
Market
Emerging
18.31%
High Yield
5.28%
High Yield
-1.37%
High Yield
28.97%
High Yield
11.13%
High Yield
2.74%
High Yield
11.85%
High Yield
1.87%
High Yield
-26.16%
High Yield
58.21%
High Yield
15.12%
High Yield
4.98%
High Yield
15.81%
High Yield
7.44%
High Yield
2.45%
High Yield
-4.47%
High Yield
17.13%
High Yield
7.50%
High Yield
-2.08%
High Yield
14.32%
High Yield
7.11%
Estate
Real
-3.81%
Estate
Real
2.82%
Estate
Real
40.69%
Estate
Real
37.96%
Estate
Real
15.35%
Estate
Real
42.12%
Estate
Real
-7.39%
Estate
Real
-48.21%
Estate
Real
37.13%
Estate
Real
19.63%
Estate
Real
-6.46%
Estate
Real
27.73%
Estate
Real
3.67%
Estate
Real
15.02%
Estate
Real
-0.79%
Estate
Real
4.06%
Estate
Real
10.36%
Estate
Real
-5.63%
Estate
Real
21.91%
Estate
Real
-9.04%
Fixed
U.S.
Glbl ex-
-3.75%
Fixed
U.S.
Glbl ex-
22.37%
Fixed
U.S.
Glbl ex-
19.36%
Fixed
U.S.
Glbl ex-
12.54%
Fixed
U.S.
Glbl ex-
-8.65%
Fixed
U.S.
Glbl ex-
8.16%
Fixed
U.S.
Glbl ex-
11.03%
Fixed
U.S.
Glbl ex-
4.39%
Fixed
U.S.
Glbl ex-
7.53%
Fixed
U.S.
Glbl ex-
4.95%
Fixed
U.S.
Glbl ex-
4.36%
Fixed
U.S.
Glbl ex-
4.09%
Fixed
U.S.
Glbl ex-
-3.08%
Fixed
U.S.
Glbl ex-
-3.09%
Fixed
U.S.
Glbl ex-
-6.02%
Fixed
U.S.
Glbl ex-
1.49%
Fixed
U.S.
Glbl ex-
10.51%
Fixed
U.S.
Glbl ex-
-2.15%
Fixed
U.S.
Glbl ex-
5.09%
Fixed
U.S.
Glbl ex-
10.11%
Equivalent
Cash
4.42%
Equivalent
Cash
1.78%
Equivalent
Cash
1.15%
Equivalent
Cash
1.33%
Equivalent
Cash
3.07%
Equivalent
Cash
4.85%
Equivalent
Cash
5.00%
Equivalent
Cash
2.06%
Equivalent
Cash
0.21%
Equivalent
Cash
0.13%
Equivalent
Cash
0.10%
Equivalent
Cash
0.11%
Equivalent
Cash
0.07%
Equivalent
Cash
0.03%
Equivalent
Cash
0.05%
Equivalent
Cash
0.33%
Equivalent
Cash
0.86%
Equivalent
Cash
1.87%
Equivalent
Cash
2.28%
Equivalent
Cash
0.67%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
The Callan Periodic Table of Investment Returns
Annual Returns for Key Indices Ranked in Order of Performance (2001–2020)
The Callan Periodic Table of Investment Returns conveys the strong case for diversification across asset classes
(stocks vs. bonds), capitalizations (large vs. small), and equity markets (U.S. vs. global ex-U.S.). The Table highlights the
uncertainty inherent in all capital markets. Rankings change every year. Also noteworthy is the difference between
absolute and relative performance, as returns for the top-performing asset class span a wide range over the past 20 years.
A printable copy of The Callan Periodic Table
of Investment Returns is available on our
website at callan.com.
© 2021 Callan LLC
24 RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES
One way to diversify your assets is to spread investments
over asset classes. To determine an asset allocation that
specically meets your needs, you need to complete a
risk tolerance assessment. It asks questions about your
retirement objectives, time horizon, risk tolerance, and
personal situation.
Depending on your answers, you are given a suggested
allocation model. These allocation models range from
conservative to aggressive. Sometimes, people think
they're more aggressive than they are or vice versa. That's
why it's important to go through an exercise like this and
identify an asset allocation model that reects who you
are as an investor.
Determine your risk tolerance
Get your risk tolerance score. Determine a number for each item, then add them up.
Risk toleranc
e scores range from 8 to 32; a moderate score is 20. A low risk tolerance score may suggest
putting more money in conservative investments that have lower volat
ility and risk. A high score may
suggest a tolerance for putting more money in aggressive investments that have higher volatility and risk.
8 20 32
I have a short investment time horizon,
few years until I’ll need most of my
money.
I have a long investment time horizon,
many years until I’ll need most of my
money.
I try to minimize the risk of investment
losses, both long-term and short-term.
I’m willing to tolerate short-term losses
to earn higher long-term returns.
I would feel great if a very conservative
investment allocation kept me from
losing money when the stock market
declined.
I would feel great if an aggressive
investment allocation allowed me to
make large investment gains when the
stock market increased dramatically.
In choosing between investments,
my primary goal is to not lose any
principal contributed to my account.
In choosing between investments,
my primary goal is to earn as high a
rate of return as possible.
I’m willing to contribute a greater
percentage of my salary, so I can
invest conservatively and avoid risk.
I’m willing to risk losing my principal
for the chances of earning higher
returns over time, so I can reduce
my monthly contributions.
I would be very upset if my quarterly
or annual return were negative.
I could accept a quarterly or annual
negative return, if my aggressive
allocation gave the chance for
higher long-term returns.
If the stock market dropped 10% over
a few days, I’d probably move my
savings out of stocks to keep from
losing more money.
If the stock market dropped 10% over
a few days, I’d probably move more
of my savings into stocks to get in on
the next market increase.
The time horizon and cost of my
goals are not exible, so unexpected
investment losses would be a dicult
setback for me.
The time horizon and cost of my goals
are exible, so unexpected investment
losses would only mean delaying the
goal or spending less on it.
*If you don’t answer all of the questions, divide your score by the number of items answered and multiply by 8.
Your risk tolerance score
25CREATING AND MANAGING WEALTH
0
26 RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES
Let dollar-cost averaging work
for you
The goal of dollar-cost averaging is to help even out the cost of investing and cut down the
guesswork about the best time to buy. It involves making continuous regular investments,
regardless of uctuating price levels. If you contribute to a 401(k) plan with your employer,
you are already using this strategy.
When using this approach, you should consider your ability to continue making purchases
in periods of low or uctuating price levels.
Let's take a look at our example. Assume in January, February,
March, April, and May you continue to invest $500, even though
your investment's share price went up and down. When the price
was up, that money bought fewer shares. When it was down, that
share price bought more shares. Because you were continually
investing, your actual share price was, on average, $9.13.
While dollar-cost averaging can reduce your average share price
and the average cost per share, it does not ensure a prot or
protects against a loss in declining markets.
Monthly Monthly
Investment
Share Price Shares
Purchased
January $500
 $10.00  50.0
February $500
 $9.00  55.6
March $500
 $8.00  62.5
April $500
 $9.00  55.6
May $500
 $10.00  50.0
27CREATING AND MANAGING WEALTH
Key action steps
Figure out my “Rule of 25” to get the basic idea of how big
my retirement nest egg will have to be
Review my investments and make sure they are
properly diversied
Complete a risk tolerance assessment so I can create an
asset allocation model that works for me
Use dollar-cost averaging to balance out the eects of
market volatility
Evaluate all risks to make sure they are properly managed
28 RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES
3
29 Age-related tax and nancial planning
milestones
30 Order and understand your Social Security
statement
31 e benets of waiting
32 Match sources of retirement income
with expenses
33 Do you have a retirement income gap?
34 Key action steps
Establishing
Your Retirement
Income Stream
Planning for a retirement that can last
30 or more years is not easy. But with a
sensible and ecient withdrawal strategy,
you can learn how to spend your money in
the right way to reach the level of income
you’ll need each year in retirement.
29ESTABLISHING YOUR RETIREMENT INCOME STREAM
Age-related tax and nancial
planning milestones
45
Age
50 55 65 75
401(k)/403(b)/IRA
catch-up
contribution
COBRA covers health
insurance if retired
Can take
qualied plan $
out with no
tax penalty
Must take $ out of
IRA/401(k)/403(b)
Roth IRA does
NOT mandate
withdrawals
Normal
retirement
age, elegible
for Medicare
Start Social Security or wait?
62
50 59⁄ 72
63⁄
65
Yes, age is only a number. But it’s an important number to make sure you prepare for these key
age-related tax and nancial planning milestones as you and your loved ones grow older.
30 RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES
Order and understand your
Social Security statement
The basis for
the Social Security
Administration’s
calculations and your
personal information
are shown at the
bottom. Be sure to
store it in a safe place!
Your full
retirement age
is here.
Your benefit
information
is displayed
on page 2.
You put
money into
Social Security
each year
you work.
There’s an annual
cap on the
amount of income
that is taxed for
Social Security.
Since you receive your statement
about 3 months before your
birthday, the current year’s income
may not be recorded.
Your earnings
information
is displayed
on page 3.
The amount
of benefits
in relation
to your full
retirement age.
Get your Social Security
statement online anytime by
creating your account at
socialsecurity.gov/myaccount
31ESTABLISHING YOUR RETIREMENT INCOME STREAM
When it comes to Social Security benets, the earlier the claim, the steeper the penalty.*
You can collect Social Security as early as age 62, but if you do so, your benets will be
permanently reduced. If you wait until your Full Retirement Age, which is based on the year you
were born, you are entitled to 100% of your earned benet.
e benets of waiting
*CNBC and Bipartisan Policy Center, September 2020
As you can see, delaying your Social Security payments beyond the Full Retirement Age results in a
signicant increase in monthly guaranteed income payments.
These examples are based on a hypothetical Social Security statement and current Social Security policy.
$1,426 / monthBenefits at age 62
Benefits at age 67
Full retirement age
$2,061 / month
Benefits at age 70 $2,561 / month
Remember, just because you’re retired doesn’t mean you have to take Social
Security. Generally, if your health is good and you can live without the income,
you will ensure the maximum payment for yourself and lock in the maximum
spousal benet by waiting until age 70.
32 RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES
Match sources of retirement
income with expenses
Matching your dierent income sources with types of expenses can be the rst step in
determining if you have a retirement income gap that you need to plan for. What’s important
is to make up any shortfall in your basic needs before contributing to your personal wants. Try
this for yourself - don't worry about dollar amounts, just income and expense sources.
MatchIncome sources Expenses
Guaranteed
Cover
Cover
needs
wants
Other
Needs
Wants
•
Social Security
•
Pensions
•
Fixed annuities
•
Veteran's benets
•
Survivor's benets
•
•
•
•
•
•
•
Retirement plan accounts
•
Variable annuities
•
Dened contribution plans
•
Earned income
•
Investment income
•
Rental income
•
Alimony
•
Income from trusts
•
•
•
•
•
Food
•
Mortgage or rent
•
Property taxes
•
Utilities
•
House and car maintenance
•
Transportation
•
Healthcare
•
•
•
•
•
Clothing
•
Memberships/subscriptions
•
Entertainment/vacations
•
Additional insurance
•
•
•
•
•
•
•
33ESTABLISHING YOUR RETIREMENT INCOME STREAM
Do you have a retirement
income gap?
If you still have an income gap
Here’s how to look at some numbers to determine if you have an income gap. You’ll need your total
expense and income sources.
= x 12 =–
Total anticipated
monthly income
Total anticipated
monthly expense
Potential monthly
income gap
Potential annual
income gap
Extend your career
Work part-time
Start a new business
Minimize expenses
Downsize your home
Consider relocating
Or think about converting some of your personal
savings to dependable income
Work Longer Spend Less
0
0
34 RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES
Key action steps
Track my current expenses and think about how they
would change in retirement
Order and review my Social Security statement
Match my retirement income sources with types of
expenses to determine if there is an income gap
35ESTABLISHING YOUR RETIREMENT INCOME STREAM
36 RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES
4
Making the
Most of What
You Have
Since your employee benets play a large
role in your overall nancial and retirement
planning process, it’s essential to review
them carefully. It is also important to make
sure you and your family are properly
protected and have your estate in order.
37 Common types of life insurance
38 Life insurance planning over your lifetime
39 Consider your insurance needs
40 Insurance plan worksheet
41 How much life and disability income
insurance is enough?
42 Long term care costs in your state
43 Separate long term care myths from realities
44 Take time to look at additional benets
45 Estate planning must-haves
46 Five reasons an estate plan is for you
48 What else can get in the way of calculating
your estate taxes?
49 Documents you need when your child
turns 18
50 Understanding Health Savings Accounts
(HSAs)
51 Key action steps
52 Are you ready to take action?
37MAKING THE MOST OF WHAT YOU HAVE
Common types of life insurance
Sometimes oered by an employer, group insurance pays a death
benet that is typically a multiple of your salary. Since an employer
oers it, the premiums are often partially or completely paid
by the company.
Pays if the insured dies during the specied term period (e.g. 10, 15
or 20 years). The longer the policy is in eect, the higher the premiums
will be.
It will pay at your death. Benet payment is not limited by time like term
life. Premiums remain level for the insured’s lifetime. Generally it costs
more than term insurance, and it builds cash value.
A form of permanent insurance like whole life. However, premiums and
the benet at death can go up and down based on the performance of
an underlying account. You have a degree of control over your premium
payment and death benet. You may have a choice of death benets.
A form of permanent insurance like whole and universal life. However,
you choose how to invest your cash values in the sub-accounts oered
by the contracts. The policy cash value and death benets will uctuate
based on the performance of the sub-accounts.
Group
Term
Whole
Universal
Variable
Variable life insurance is oered by prospectus only, which is available from your
registered representative. You should carefully consider the product’s features, risks,
charges and expenses and the investment objectives, risks and policies of the
underlying portfolios, as well other information about the underlying funding choices.
This and other information is available in the prospectus, which you should read
carefully before investing. Product availability and features may vary by state. All
product guarantees are based on the claims-paying ability of the issuing insurance
company. The amounts allocated to the variable investment options of your account
balance are subject to market uctuations so that, when withdrawn or surrendered
it may be worth more or less than its original value.
38 RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES
Life insurance planning over
your lifetime
Permanent Life Insurance
Term Life Insurance
25 35 45 55 65+
Starting out Growing Midlife Retirement ready Retirement
Age
•
Early career
•
Marriage
•
Higher income
•
Parenting
•
Home
ownership
•
Higher income
•
Larger family
•
Bigger home
•
Highest income
•
Empty nest
•
Downsize home
•
Fixed income
•
Leaving a legacy
•
Relocation
Life insurance is rarely a “set it and forget it" solution. Like asset allocation, insurance allocation can be
just as important by combining the appropriate amounts of term and permanent life insurance based
on your current and long term objectives.
Financial professionals suggest reviewing your policy at every life stage to determine whether more,
less, or what combination of coverage may be appropriate.
39MAKING THE MOST OF WHAT YOU HAVE
Consider your insurance needs
Life insurance
•
How much coverage do you need on your life and, if applicable, your spouse/partner’s life?
•
Consider whether term or permanent life insurance is the better option.
•
Consider your employer-sponsored life insurance and understand cost and portability options.
Disability income insurance
•
Calculate how much income you will lose if you were to become disabled.
•
Consider employer-sponsored coverage as your rst option.
Long term care insurance
•
What do hourly home health care and annual nursing home care cost in your area?
•
Do you have sucient income to cover the cost of long term care?
Automobile insurance
•
Determine whether your current liability insurance is adequate.
•
Review with your insurance agent your current underinsured/uninsured motorist coverages.
Homeowners insurance
•
Is your current liability insurance adequate?
•
Are your property damage limits sucient based on the current value of your home?
•
Do you require a rider to insure jewelry, art, collectibles above the base policy limits?
•
Consider whether you want to purchase a ood insurance policy or optional earthquake coverage.
•
Create a record by videotaping and preparing a catalog for your possessions.
Excess liability insurance
•
In coordination with your automobile and homeowner’s liability coverage, consider
purchasing one million dollars or greater of personal excess liability insurance. This is also
called an umbrella liability policy.
40 RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES
Insurance plan worksheet
Insurance is an integral part of nancial planning because it protects you and your loved ones from
the costs associated with accidents, disability, illness, and death.
Take a few minutes to think about your comfort level with the insurance-related decisions you’ve
made so far.
How comfortable are you when you compare your current
insurance to your:
Very
comfortable
Comfortable
enough
Not
comfortable
Lifestyle in terms of taking risks (scuba diving, snowboarding)
Daily risks (driving, screen fatigue, identity theft)
Home maintenance (storm or ood damage, re)
Car (condition, safety, appearance)
Personal healthcare needs now
Personal healthcare needs in the future (chronic conditions)
Family healthcare needs now
Family healthcare needs in the future (chronic conditions)
High-risk habits (smoking, heavy alcohol use, drug abuse)
Emergency fund to cover home/auto repairs or medical bills
Emergency fund to cover living expenses in the event of job loss
Natural disaster threats
Ability to take time o for caregiving
Remember, life can change in a moment. That’s why it’s essential to make sure
you’re protected when life’s unexpected events happen with proper insurance
planning and risk management.
41MAKING THE MOST OF WHAT YOU HAVE
How much life insurance
is enough?
It is also important to make sure you have the proper protection in place in the event of an
unforeseen circumstance. You can multiply your salary by 10 to determine approximately
how much coverage you need, and your partner should do the same. Of course, this is just a
guide, and everyone’s situation is dierent but it’s a good starting point.
approximately how
much life insurance
coverage you need
salary (before taxes)
10 x $ =
How much disability income
insurance is enough?
We all run the risk of becoming disabled due to an unexpected illness or accident. What
would happen if you were no longer able to earn a living? To help their employees prepare
for that possibility, employers often oer long term disability insurance. You may be asked
to pay for part or all of the cost. Depending on your nancial obligations and other sources
of income, it’s probably a good idea to purchase enough long term disability insurance to
replace 65% to 85% of your pay. And it’s important to know that age plays an important
role here.
approximately how
much disability insurance
coverage you need
salary (before taxes)
65% - 85% x $ =
0
$0 - $0
42 RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES
The cost of care varies based on care setting, geographic location, level of care required, and
other factors. Knowing the cost of care is the rst step to helping you plan for it.
Long term care costs in
your state
19
Facility Care: Nursing Home (Private Room) Median Annual Cost**
TX
HI
CA
NV
CO
NM
KS
OK
NE
SD
ND
MN
IA
MO
AR
IL
KY
WI
MI
IN
OH
WV
PA
NY
VT
NH
MA
MD
DE
NJ
CT
ME
UT
AZ
OR
WA
ID
WY
MT
AK
FL
NC
SC
GA
AL
MS
TN
LA
VA
RI
DC
$436,540
$82,932
$78,475
$98,550
$137,240
$116,800
$167,900
$172,280
$152,388
$117,804
$86,082
$165,619
$85,775
$109,500
$84,315
$101,835
$84,315
$95,265
$70,080
$162,425
$127,750
$127,385
$116,800
$144,303
$68,985
$85,775
$99,280
$96,725
$153,172
$95,174
$135,780
$142,350
$99,645
$127,020
$155,125
$98,550
$69,350
$134,138
$129,940
$122,640
$94,327
$90,246
$91,433
$76,650
$100,375
$105,850
$123,735
$131,400
$113,150
$145,635
$104,573
USA average cost $105,850
**Numbers exclude Puerto Rico
Source: Genworth Cost of Care Study, 2020. Costs for private room in nursing care facility.
43MAKING THE MOST OF WHAT YOU HAVE
Separate long term care myths
from realities
1. Five Myths About Long Term Care, Washington Post, September 2020; 2. California lookback period is 30 months. In 2021, New York
will be implementing a 30-month lookback period for their Community Medicaid program. 3. American Council on Aging, January 2021;
Longtermcare.gov, October 2020
Myth Reality
Medicare pays for long term care. Traditional Medicare does not pay for long term care.
Medicaid, the health insurance program for the very
poor, pays for about half of all long term care costs.
1
Most long term care is provided in a
nursing home.
Family history, age, and income are
all primary factors in calculating long
term care insurance premiums.
3
You can qualify for Medicaid to pay
for long term care by transferring
assets to other family members.
85% of long term care is provided at home or the home
of relatives.
1
Age, health, and the type of coverage are the primary
factors in calculating long term care insurance premiums.
3
Upon application, the state will “lookback” over ve
years to prevent Medicaid applicants from giving away
assets at less than fair market value to meet Medicaid’s
asset limit.
2
44 RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES
Many of us don’t take enough time to consider the value of all of the benets oered by our
employers. These additional benets are paid completely or mostly by employees. They are
important because they can close gaps in employer-sponsored coverage, allow easy access through
payroll deduction, and help ease the burden of what can be high and unpredictable out-of-pocket
expenses. Here are some of the traditional additional benets your employer may oer:*
Take time to look at additional
benets
Accident insurance: Helps offset costs that
may not be covered under your employer’s
existing medical plan. It generally provides a
lump-sum payment after an accident and
helps with out-of-pocket expenses such as
deductibles, copays, and transportation to
medical centers, childcare and more. It may
also include benefits for injuries: fractures,
dislocations, concussions, lacerations, eye
injuries, torn knee cartilage, ruptured discs,
and second and third-degree burns.
Cancer insurance: A cancer diagnosis
can mean unexpected expenses such as
deductibles, copays, and costs for
out-of-network care. Even if you have a
disability plan, it may only cover a portion
of your income. There could also then be a
significant gap between any disability
payments you receive and your family’s
everyday living expenses like utilities,
groceries, and rent.
Critical illness insurance: Critical illnesses
can happen when you least expect them –
and they can be costly. Even quality medical
plans can leave you with extra expenses to
pay. Costs like plan deductibles, copays for
doctor visits, and extra costs for out-of-
network care can add up fast. A critical illness
insurance policy can help close those gaps.
Hospital indemnity insurance: A hospital
stay can be expensive. Be ready for costs not
covered by your medical plan with hospital
indemnity insurance which may include coverage
for hospital admission, accident-related
inpatient rehabilitation and hospital stays.
Legal services: Group legal plans provide
affordable, convenient access to a highly
qualified network of attorneys for everyday
personal legal matters which may include
preparation of wills, living wills and trusts,
purchase, sale and refinancing of a residence,
debt collection and foreclosure defense,
identity theft defense, tenant negotiations,
civil litigation defense, and adoptions.
Pet insurance: Vet visits can be expensive.
Pet insurance helps cover the cost of injuries
and illnesses so you can give your pet the
best possible care.
Auto insurance: Whether it’s a car, boat, or
RV; auto insurance protects your vehicles,
yourself and your family. Policies generally offer
a wide variety of coverage options, including
liability protection, collision and comprehensive
coverage, personal injury protection and
uninsured motorists’ coverage.
Home insurance: If you own a house, condo,
or apartment; a homeowner’s insurance policy
can protect you if you have to rebuild your
home and replace lost or damaged property.
Some policies may also include customizable
coverage in the event of tornadoes, hail, fire,
theft, and vandalism.
*Not all companies will offer these benefits
45MAKING THE MOST OF WHAT YOU HAVE
Estate planning must-haves
Last will and testament. This is about as basic
as it gets. You typically hire an attorney to draft
a document that reects your wishes. Can you
write a will on your own? Yes — many of you
have probably seen will creation software you
can use. But we strongly suggest you hire an
attorney at least to check it for clarity.
Durable power of attorney. There may come
a time when, because of physical or mental
incapacity, you’re not reasonably able to act
on your own behalf. If you previously designated
your spouse/partner or other trusted individual,
that person can legally make nancial and
other decisions and take actions when you’re
not able to.
Living will and health care proxy. Some of
you may remember the publicity around Terry
Schiavo and the agonizing conict of whether
or not to remove her feeding tube after medical
evidence overwhelmingly suggested she would
never regain consciousness. The controversy
arose because no one could produce a legal
document in which she expressed her wishes
should such an event occur. A living will
species what measures should be taken to
keep you alive under certain circumstances,
while a health care proxy appoints an agent to
make health care decisions for you.
HIPAA release form ensures that your family
and other people you identify can receive
condential medical information about your
condition that will enable them to make
decisions on your behalf.
Beneciary designations. Another basic tool of
estate planning is the beneciary designations
you make on your employer benets and other
accounts. Make sure they are up to date.
Digital duciary. Digital is a relatively new and
often overlooked category of assets that you
should consider when creating an estate plan.
Most of us have many digital accounts, and
those accounts may be inaccessible when a
person becomes incapacitated or dies.
Special needs plan. If you are a caregiver for
a dependent with special needs, it is important
to be aware of planning issues and options
available. There are many concerns that come
with special needs planning which can include:
eligibility for government benets; types of
special needs trusts and determining which
one works best for a particular situation;
appropriate nancial funding vehicles, including
life insurance, to enhance the dependent’s
quality of life.
Your estate plan should be made up of a set of legal documents, that when drafted correctly, will
collectively protect you, your loved ones, and your assets. Here are the items every estate
plan should have:
46 RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES
If you hear the phrase “estate planning” and immediately tune out, you’re not alone. An estate
plan is not only for the wealthy who own an actual estate, complete with manicured lawns and a
mansion. It's for everyone—because everything you own counts as your estate.
Still not convinced....
1. Make your wishes known
The most important reason to have an estate plan is to ensure what you want is clear and your
requests are honored if you’re alive but unable to make decisions on your own behalf, or after you
pass away.
A will alone is not enough to dictate particular requests and rules that you want to set up for your
heirs. If you only have a will, beneciaries will simply receive what you bequeath to them and are
free to do what they want with it. However, a trust fund established by your estate can stipulate
how, when, and why funds you leave to your loved ones may (or may not) be used.
An estate plan will also cover issues like who receives guardianship and custody over your children
or who makes medical decisions for you, if you're unable to do so.
2. Skip over probate
Without an estate plan, the decisions above—including who gets custody of your children—would
pass through probate court (a court that handles estate matters). A probate judge could be the one
who ultimately decides how your nancial accounts, possessions, and anything of value will be split
between interested parties, and who will receive guardianship of any minors or dependents.
Probate court is also a matter of public record, whereas wills and trust documents can remain
private. And, because it is a court of law, the probate process opens the door to litigation and
arguments between family and friends who may disagree on how your assets should be distributed.
You can avoid these issues with a clear will and trust as part of an estate plan.
3. Avoid unnecessary taxes
If you have assets and valuables in your name when you pass away, those belongings are your
estate—and the value of your estate can be taxed at both the federal and state level.
Depending on where you live, you may want to use a trust to protect your estate from these taxes,
as a higher tax bill leaves a lower amount in assets available for your heirs to receive.
Tax liability diers by state, so it's important to understand the regulations that apply where you live.
Five reasons an estate plan is
for you
47MAKING THE MOST OF WHAT YOU HAVE
4. Protect yourself if you’re incapacitated
Estate plans don’t just help protect your assets and your family members after you’re no longer
here—they can protect you while alive, too.
For example, if you’re unable to make decisions that are in your best interest, someone with power
of attorney over your accounts and assets can step in to conduct business on your behalf, manage
bills and other nancial to-dos, and sign o on legal documents where your signature is needed.
Healthcare proxies or advanced healthcare directives are important to draft as part of your plan, too.
These documents can stipulate important demands about your medical care, such as "do-not-
resuscitate" orders.
5. Give loved ones clarity and yourself peace of mind
A well-organized and complete estate plan can help eliminate confusion, prevent ghting between
potential beneciaries (because there will be no ambiguity about what you may have wanted),
and create organization and structure to follow when it comes to inheritances and passing on
possessions.
This can help make processing everything—emotionally and logistically—easier for your friends and
family if you were no longer around (or able) to clearly provide direction.
In the meantime, an estate plan can provide peace of mind to you, as well. It can be a big relief to
know that your aairs are in order and what you want are both clearly articulated and protected by
legal documentation. Plus, getting organized is always a good thing.
When it comes to creating the best estate plan for you, it helps to hire an estate planning attorney
to draft the necessary documents. Work with someone in your state, as specic laws governing
things like wills and trusts vary depending on where you live—or check with your employer to see
if they can help. A workplace legal plan can provide convenient access to qualied estate-planning
attorneys to help you get started.
48 RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES
What else can get in the way of
calculating your estate taxes?
As the saying goes, not only can you not “take it all with you” but something called Income in Respect
of a Decedent (IRD) may also prevent your beneciaries from “taking it all with them” too.
*Investopedia 2021
Income in Respect of a Decedent (IRD) refers to untaxed income – such as remaining employee
compensation or IRA distributions- that a decedent had earned or had a right to receive during
their lifetime.
IRD is taxed as if the decedent is still living.
Beneciaries are responsible for paying
taxes on IRD income under most
circumstances.*
49MAKING THE MOST OF WHAT YOU HAVE
Documents that you need when
your child turns 18
Turning 18 is a big deal, not just from a parent’s emotional perspective, but legally too. Parents may
not realize they can no longer make legal decisions. If your child is going away to college, many of
them do a good job of notifying parents of these matters. However, it is probably a good idea to take
the initiative by having documents in place. Here are some of the primary ones to consider.
Health care power of attorney/Proxy: When
we think of a Health Care Power of Attorney,
it is frequently for an older parent, but it is just
as important for college-age adult children.
This document gives parents the ability to
make decisions about their child’s health care.
Usually, this is not used unless a child becomes
incapacitated. If a student goes to school in
a dierent state it is suggested to have a
document from each state.
HIPAA authorization: This authorization allows
doctors to speak about a student’s medical
condition with whomever the student chooses.
Students can also set limits on how much and
what type of information can be shared. This
authorization should be kept in a handy place
because you will need to show it to a local
medical professional or hospital if you should
need access to otherwise private information.
Even with this authorization, students might still
need to sign a release form that is specic to
their college, as many have varying policies and
procedures.
Financial power of attorney: This document is
a way to allow parents to manage their child’s
nances. It can become eective immediately
upon signing or at a point in the future. It can
also permit parents to act on all nancial matters
or have limits on their authority. This would be
especially useful if the child has a car accident
or is ill, leaving him or her unable to make
nancial decisions. It may also be useful if a child
is planning on traveling abroad or has an over-
drawn bank account due to fraud.
Education record release: The Family Educations
Rights and Privacy Act (FERPA) require students
age 18 and older to provide written consent
(with very few exceptions) before grades,
transcripts and disciplinary actions can be shared
with parents. This would also include notications
of nancial-aid documents. Colleges usually notify
parents of this requirement but even so, many may
not understand the implications or forget to
act upon it.
50 RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES
Understanding Health Savings
Accounts (HSAs)
As you probably know, health insurance plans have consistently topped the list of employees’ most
precious benets. You may have heard about Health Savings Accounts (HSAs), which are growing in
popularity. When paired with high-deductible health plans, HSAs oer tax benets and are designed
both to help you with the rising costs of healthcare and to save for future medical expenses. But are
they right for you?
So...is an HSA right for you?
As you consider your choices, think about your budget and what healthcare you may need. If
you are generally healthy and want to save for future expenses, than an HSA may be the right
choice. And, if you are near retirement, it may also make sense to oset healthcare costs in
retirement.
Alternatively, if you think you might need expensive medical care over the next year and
would nd it hard to meet a high deductible, even with money in an HSA, it might not be the
best solution.
What is right for you is to get all the information and help you need to make the most of your
healthcare plan options.
Advantages of an HSA:
•
You decide how much money to set aside
for healthcare costs – puts you in control
•
You decide how to spend your HSA money –
you can shop around for care based on
quality and cost
•
You always own the account and the money
– even if you change jobs, retire or stop
contributing – the money is yours
•
Any unused money rolls over to the next year
– there is no “use it or lose it” rule
•
You don’t pay taxes on contributions and any
earnings in the account – just like a 401(k)
Disadvantages of an HSA:
•
Illness is usually unpredictable making it
dicult to budget
•
Information on cost and quality of care
may be dicult to nd and understand
•
Depending on your situation, it may be
challenging to set aside money to put in
an HSA
•
Pressure to save money may prevent you
from getting medical care when needed
•
If you take money out for nonmedical
expenses, you will have to pay taxes on it
51MAKING THE MOST OF WHAT YOU HAVE
Key action steps
Determine how much disability income and life
insurance I need
Look at my additional benets that can close gaps
in my benets package and may help with possible
high, unpredictable out of pocket expenses
Know how much long term care costs in my state
Review the 5 basic elements of an estate plan, and
create or update my will
52 RETIREWISE: A FINANCIAL EDUCATION WORKSHOP SERIES
Are you ready to take action?
Building the Foundation
Max out my 401(k) contributions, or at least enough to get my company match if it’s oered
Create and manage a budget and build my emergency fund
Start saving now to take advantage of compounding
Know how taxes and ination aect my investments
Creating and Managing Wealth
Figure out my “Rule of 25” to get the basic idea of how big my retirement nest egg will
have to be
Review my investments and make sure they are properly diversied
Complete a risk tolerance assessment so I can create an asset allocation model that works
for me
Use dollar-cost averaging to balance out the eects of market volatility
Evaluate all risks to make sure they are properly managed
Establishing Your Retirement Income Stream
Track my current expenses and think about how they would change in retirement
Order and review my Social Security statement
Match my retirement income sources with types of expenses to determine if I have an
income gap
Making the Most of What You Have
Determine how much disability income and life insurance I need
Look at my additional benets that can close gaps in my benets package and may help
with possible high, unpredictable out of pocket expenses
Know how much long term care costs in my state
Review the 5 basic elements of an estate plan, and create or update my will
MetLife administers the Retirewise program, but has arranged for specially trained third party nancial
professionals to oer nancial education and, upon request, provide personal guidance to employees
and former employees of companies providing Retirewise through MetLife.
This discussion is based on our understanding of the tax law as it exists as of 3/31/2021.
Any discussion of taxes is for general informational purposes only, does not purport to be complete or
cover every situation, and should not be construed as legal, tax or accounting advice. Clients should
confer with their qualied legal, tax and accounting advisors as appropriate.
Securities and investment advisory services oered through qualied registered representatives of
MML Investors Services, LLC. Member SIPC. www.SIPC.org. 6 Corporate Drive, Shelton, CT 06484,
Tel: 203-513-6000. MML Investors Services LLC. is not aliated with MetLife.
Metropolitan Life Insurance Company
200 Park Avenue
New York, NY 10166
L0321012409[exp1222][All States][DC,PR]
CRN202304-280986
© 2021 MetLife Services and Solutions, LLC
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