Fillable Form - 7 Steps to Retirement PC1412

Fillable Form - 7 Steps to Retirement PC1412

THE 7-STEP RETIREMENT PLAN

A COMPREHENSIVE GUIDE FOR PLANNING AND ENJOYING YOUR LIFE IN RETIREMENT.

Wealth | Investments | Planning Commerce Trust Company

INTRODUCTION

Planning for retirement can be a challenging exercise, so it is easy to put it off for another day. Though you may be saving diligently, you still may not have the confidence that you will be able to enjoy the lifestyle you envision in retirement. This guide will walk you through seven steps to help you develop a plan suited to your needs and lifestyle goals.

1. ESTIMATE YOUR LIFE EXPECTANCY 2. PROJECT YOUR RETIREMENT EXPENSES 3. INCLUDE HEALTHCARE COSTS 4. DETERMINE WHEN YOU WILL RETIRE 5. DECIDE WHERE YOU WILL RETIRE 6. CREATE A TAX-EFFICIENT INCOME STREAM 7. PROTECT YOUR PLAN

As you review each step, take notes to share with a Commerce Trust advisor who can help you explore the potential impact on your retirement plan.

1 | THE 7-STEP RETIREMENT PLAN

LIFE EXPECTANCY

1. ESTIMATE YOUR LIFE EXPECTANCY With advances in healthcare and quality of living, Americans are living longer and therefore spending more time in retirement. This is great news – especially for those who are financially prepared to spend two or three decades in retirement. If you underestimate how long you may live in retirement, you risk outliving your assets. If you are too conservative, you may leave a larger inheritance than anticipated that could have been enjoyed during your lifetime. There is no way to know exactly how long you will live, but you can make some informed estimates based on your general health, medical conditions that run in your family, and the longevity of your parents.

A 65-year-old woman born on January 1, 1951, has a life expectancy of 86.7 years. If she lives to age 70, her life expectancy increases to 87.8 years. A man the same age has an average life expectancy of 84.4 years. *

QUESTIONS TO ASK ■ How long did your parents live? ■ What is your general health condition? ■ How active are you? ■ What are you doing to improve the quality of your life?

NOTES

* Social Security Administration’s Life Expectancy Calculator

2 | THE 7-STEP RETIREMENT PLAN

EXPENSES

2. PROJECT YOUR RETIREMENT EXPENSES Your current living expenses may be a good start for estimating your expenses in retirement, but don’t stop there. Many retirees find that some categories fall off dramatically, like clothing, but others, like travel, increase significantly. In addition to your basic necessities, consider other expenses that are discretionary, such as gifts and charitable giving, and plan for potential expenses like caring for aging parents or helping adult children. You may also be able to anticipate large one-time expenses like paying for a child’s wedding. Use the budget worksheet at the end of the workbook to help you get started. Once you have a handle on your estimated expenses, remember to factor in inflation. Rising prices means reduced buying power over time, so the items you purchase today will cost more in the years to come.

In 1975, milk was $1.65 per gallon. Today, milk is $3.49 per gallon. That is more than double the cost in 40 years.

QUESTIONS TO ASK ■ What hobbies do you plan to enjoy during retirement, and how will you afford them? ■ Will you need to assist aging parents or adult children during retirement? ■ Do you want to give to a grandchild’s education, charities, or other organizations? ■ Are there large, one-time expenses on the horizon? ■ Do you plan to open new credit accounts (e.g., mortgage, auto loan, line of credit) in retirement? If so, do you understand how getting income from your assets instead of an employer can impact your ability to borrow?

NOTES

3 | THE 7-STEP RETIREMENT PLAN

HEALTH CARE COSTS

MEDICARE PARTS: A – covers hospital costs only

3. INCLUDE HEALTH CARE COSTS One of your largest expenses in retirement may be health care. If you are no longer covered by your or a spouse’s employer, you need to consider other options, including Medicare, private insurance, self- insurance, or some combination. If you decide to retire before age 65, you will need to find insurance coverage until you are eligible for Medicare. While Medicare is a great benefit for those who are eligible, it does not cover all medical expenses – notably long-term care. One alternative is to purchase long-term care insurance to protect your retirement fund against an ill-timed, large withdrawal to pay for long-term care.

B – covers doctors’ services, outpatient hospital care, things like physical and occupational therapy, and some home health care C – an alternative to parts A and B that provides private Medicare Advantage D – prescription program Medigap – extra, private health insurance to pay health care costs not covered by Medicare

QUESTIONS TO ASK ■ If you retire before Medicare eligibility, will you need to purchase private insurance? ■ Are you familiar with the necessary Medicare paperwork?

■ How will you pay for dental and vision care? ■ How will you pay for long-term care, if needed?

NOTES

4 | THE 7-STEP RETIREMENT PLAN

RETIREMENT AGE

4. DETERMINE WHEN YOU WILL RETIRE You can influence how much time you will spend in retirement by deciding when you will retire. The earlier you retire, the more assets you will need to support you throughout retirement. Retiring before traditional retirement ages may mean some trade-offs, such as fewer years to earn income to save for retirement and more years you will need to depend on your assets for income.

Age 70½ - Start taking required minimum withdrawals from most retirement accounts by this age, or be subject to tax penalties

Age 59½ - No more tax penalties on withdrawals from retirement accounts, but leaving money in means more time for it to grow

Age 65 – Eligible for Medicare

50

59½

62

65

66

70½

Age 50 – Begin making catch-up contributions – an extra amount that those over 50 can add to 401(k)s, IRAs, and other retirement accounts

Age 62 – The minimum age to receive Social Security benefits, but delaying means a bigger monthly benefit

Age 66 – Eligible for full Social Security benefits, if born between 1943 and 1954

QUESTIONS TO ASK ■ How will you spend your time in retirement? ■ How will you receive income if you retire before you can withdraw money from retirement accounts without penalty or access Social Security? ■ How will you manage healthcare if you retire before Medicare eligibility?

NOTES

5 | THE 7-STEP RETIREMENT PLAN

RETIREMENT LOCATION

5. DECIDE WHERE YOU WILL RETIRE Retirement may present an opportunity for you to relocate to be closer to family or live in a moderate climate. It may afford you the opportunity to upsize, downsize, or purchase a second home. The options are endless, and so are the considerations for each option. Remember, your retirement destination will have an impact on your expenses.

The cost of living index in Springfield, MO, is 29% lower than the cost of living index in Scottsdale, AZ.

QUESTIONS TO ASK ■ Will you remain in your current home? ■ Do you want to downsize? ■ Do you want to purchase a vacation home? ■ Will you move to another state? If so, have you explored the difference in state taxes on property and income? ■ What are the requirements of becoming a resident in a new state?

NOTES

6 | THE 7-STEP RETIREMENT PLAN

INCOME STREAM

6. CREATE A TAX-EFFICIENT INCOME STREAM The biggest shift in retirement could be going from receiving a paycheck from an employer or your business to having to create an income stream from your assets. Maybe your pre-retirement income was largely based on bonuses and incentives like stock options that you will no longer receive, or your retirement could trigger a large one-time payout. One thing remains the same: Taxes are often still a concern. There is no guarantee your taxes will decline in retirement, so it is wise to develop a tax-efficient withdrawal strategy for your assets. If you supplement your retirement fund by choosing to work in some capacity during retirement, you will want to understand how earned income can affect taxes on Social Security.

Estimate your Social Security benefits on the Social Security Administration’s website at ssa.gov.

QUESTIONS TO ASK ■ What are all of your sources of income? ■ What is your likelihood of running out of money in retirement? ■ Have you decided when to start Social Security benefits? ■ Will you need to revisit your withholdings?

■ Have you considered consolidating IRAs and employer-sponsored retirement plans to better assess your position? ■ Are you comfortable with how your assets are invested, the risk you are taking on, and the return you expect to receive? ■ Do you want to defer income as long as possible? ■ How will you withdraw funds from taxable and non-taxable accounts to minimize your tax liability? ■ Do you understand your employer’s vesting schedule and impact on your taxes?

NOTES

7 | THE 7-STEP RETIREMENT PLAN

PLAN PROTECTION

Get organized. Transitioning into retirement is a great reason to organize your financial life. To get started, list key information and professional contacts on the financial organizer pages in the back of this workbook. You can share the details now or designate someone to give instructions to your family in the event of an emergency. Either way, now is good time to get organized.

7. PROTECT YOUR PLAN After decades of hard work, investing, and discipline, you’ve likely accumulated a significant amount that should be protected. With proper planning, you can protect your assets through retirement, and outline how you want the remainder distributed after you are gone. Insurance can be used to protect your current income stream or as a tax- efficient way to pass your financial legacy on to loved ones. In addition to insurance, you will want to have your estate plan in place. Nearly everyone, regardless of net worth, can benefit from estate planning tools such as a will, trust, healthcare power of attorney, and durable power of attorney.

QUESTIONS TO ASK ■ Do you have a healthcare power of attorney? ■ Are there minors, disabled adults, or family members who have special needs and rely on you?

■ Do you have an estate plan? If so, when was it revised? ■ Are your assets properly titled for efficient transfer? ■ Do you have enough or too much insurance? ■ When was the last time you updated beneficiaries on your accounts?

NOTES

8 | THE 7-STEP RETIREMENT PLAN

OTHER CONSIDERATIONS

Walking through these seven steps will get you well on your way to a custom retirement plan designed for your lifestyle. If your assets aren’t lining up with the lifestyle you envisioned, consider: ■ Maxing out contributions

■ Reallocating your investments ■ Revisiting your retirement date ■ Maximizing your Social Security ■ Talking to a Commerce Trust advisor who can help you adjust your approach

9 | THE 7-STEP RETIREMENT PLAN

BUDGET WORKSHEET Popular advice often suggests using rules of thumb or simple formulas, like 80% of your pre-retirement budget, to calculate your expected expenses in retirement. Unfortunately, these calculations may not accurately reflect your post-retirement income needs, as you may have lower housing expenses due to downsizing or higher healthcare expenses because you are carrying the cost of private insurance. Use the following charts to get an idea of how your current income and expenses will compare to those in retirement. Be sure to take a close look at categories that can change significantly in retirement like healthcare, housing, travel, and hobbies.

EXPENSE

ACTUAL (MONTHLY)

ESTIMATED (MONTHLY)

Housing Mortgage/rent Property taxes

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

Home/renters insurance

Electricity

Oil/gas

Water/garbage/sewer Telephone/cell phone

Cable/Internet

Maintenance/HOA fees

Other

TOTAL

Living Expenses Food

Clothing

Beauty/barber

Other

TOTAL

Automobile and Transportation Car payment(s)

Maintenance/repairs License/registration

Fuel

Insurance

Other

TOTAL

ONE-TIME EXPENSE (E.G., WEDDING, COLLEGE TUITION)

AMOUNT $ $ $

10 | THE 7-STEP RETIREMENT PLAN

BUDGET WORKSHEET (CONTINUED)

EXPENSE

ACTUAL (MONTHLY)

ESTIMATED (MONTHLY)

Medical/Health Care Health insurance

$ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $ $

Life insurance

Long-term care insurance

Disability insurance Medical expenses Dental expenses

Medical services

Medical co-payments

Other

TOTAL

Family Care Parent/child care

Education Clothing Alimony

Other

TOTAL

Miscellaneous Entertainment

Dining out

Hobbies

Publications Education

Traveling/vacation Charitable donations

Gifts

Professional/social dues

Memberships

Other Other Other

TOTAL

TOTAL EXPENSES

11 | THE 7-STEP RETIREMENT PLAN

PERSONAL PROFILE

Use this Personal Profile to list names and contact information for key people.

My Name: Spouse Name:

Important People (children, grandchildren or parents) Name: Relationship:

Phone:

Name:

Relationship:

Phone:

Name:

Relationship:

Phone:

Name:

Relationship:

Phone:

Name:

Relationship:

Phone:

Professionals Contact List 1. Accountant Name:

Phone:

2. Attorney Name:

Phone:

3. Physician Name:

Phone:

4. Physician Name:

Phone:

5. Insurance Agent Name:

Phone:

6. Investment/Investment Advisor:

Phone:

7. Investment/Investment Advisor:

Phone:

8. Emergency Contact:

Phone:

9.

Phone:

10.

Phone:

12 | THE 7-STEP RETIREMENT PLAN

DOCUMENT LOCATOR

List the location of the following items so you or your beneficiaries can find them quickly, if needed.

LOCATION

CONTACT

PHONE

Birth Certificate Spousal Birth Certificate Social Security Card/Info Spousal Social Security Card/Info Military Records Marriage Certificate Divorce Papers Income Tax Returns Safety Deposit Box Key and Bank Location Will Trust Documents Living Will/ Healthcare POA Durable Power of Attorney Other Estate Documents Pension Info Group Life Insurance Info Other Life Insurance Info

13 | THE 7-STEP RETIREMENT PLAN

DOCUMENT LOCATOR (CONTINUED)

LOCATION

CONTACT

PHONE

Home Insurance Info Disability Insurance Info Long-term Care Insurance Info Other Insurance Info Deed to House Title to Car(s) Mortgage Papers Credit Card Info Personal Property Appraisals Other Important Papers

14 | THE 7-STEP RETIREMENT PLAN

FINANCIAL INVENTORY

Checking Account Location: Checking Account Location: Savings Account Location: Savings Account Location:

Notes:

Notes:

Notes:

Notes:

Total CDs Location:

Notes:

Government Securities Location: Government Securities Location:

Notes:

Notes:

Fixed Annuities Location: Fixed Annuities Location: Variable Annuities Location: Variable Annuities Location:

Notes:

Notes:

Notes:

Notes:

15 | THE 7-STEP RETIREMENT PLAN

FINANCIAL INVENTORY (CONTINUED)

Employer-sponsored Retirement Plan Location: Employer-sponsored Retirement Plan Location:

Notes:

Notes:

Deferred Compensation Plan Location: Deferred Compensation Plan Location:

Notes:

Notes:

Retirement Plans at Previous Employers Location: Retirement Plans at Previous Employers Location:

Notes:

Notes:

Traditional or Roth IRA Location: Traditional or Roth IRA Location: Other Taxable Investments Location: Total Insurance Cash Value Location:

Notes:

Notes:

Notes:

Notes: Personal Property/Other (cars, furniture, jewelry, land, etc.) Location: Notes:

16 | THE 7-STEP RETIREMENT PLAN

FINANCIAL INVENTORY (CONTINUED)

LIABILITIES

Mortgage Location:

Notes:

Second Mortgage (line or loan) Location:

Notes:

Line of Credit Location:

Notes:

Bank Loan Location:

Notes:

Outstanding Credit Card Debt Location: Outstanding Credit Card Debt Location:

Notes:

Notes:

Back Taxes Owed Location: Total Other Debt* Location:

Notes:

Notes:

17 | THE 7-STEP RETIREMENT PLAN

INSURANCE SUMMARY

Permanent Life Insurance (whole life, universal life, variable universal life) Name of Insured: Policy Owner:

Company/Issuer:

Policy Number:

Date Issued:

Premium:

Due Date:

Date Last Reviewed:

Name of Insured:

Policy Owner:

Company/Issuer:

Policy Number:

Date Issued:

Premium:

Due Date:

Date Last Reviewed:

Long-term Care Insurance Name of Insured:

Policy Owner:

Company/Issuer:

Policy Number:

Date Issued:

Premium:

Due Date:

Date Last Reviewed:

Name of Insured:

Policy Owner:

Company/Issuer:

Policy Number:

Date Issued:

Premium:

Due Date:

Date Last Reviewed:

Disability Insurance Name of Insured:

Policy Owner:

Company/Issuer:

Policy Number:

Date Issued:

Premium:

Due Date:

Date Last Reviewed:

18 | THE 7-STEP RETIREMENT PLAN

INSURANCE SUMMARY (CONTINUED)

Name of Insured:

Policy Owner:

Company/Issuer:

Policy Number:

Date Issued:

Premium:

Due Date:

Date Last Reviewed:

Term/Group Life Insurance Name of Insured:

Policy Owner:

Company/Issuer:

Policy Number:

Face Value of Death Benefit:

Date Issued:

Premium:

Due Date:

Beneficiaries:

Date Last Reviewed:

Name of Insured:

Policy Owner:

Company/Issuer:

Policy Number:

Face Value of Death Benefit:

Date Issued:

Premium:

Due Date:

Beneficiaries:

Date Last Reviewed:

Health Insurance Name of Insured:

Policy Owner:

Company/Issuer:

Policy Number:

Face Value of Death Benefit:

Date Issued:

Premium:

Due Date:

Beneficiaries:

Date Last Reviewed:

Cash Value:

19 | THE 7-STEP RETIREMENT PLAN

INSURANCE SUMMARY (CONTINUED)

Name of Insured:

Policy Owner:

Company/Issuer:

Policy Number:

Face Value of Death Benefit:

Date Issued:

Premium:

Due Date:

Beneficiaries :

Date Last Reviewed:

Cash Value: Property/Renters Insurance Name of Insured:

Policy Owner:

Company/Issuer:

Policy Number:

Date Issued:

Premium:

Due Date:

Date Last Reviewed:

Name of Insured:

Policy Owner:

Company/Issuer:

Policy Number:

Date Issued:

Premium:

Due Date:

Date Last Reviewed:

Automobile Insurance Make/Model:

Insured Name(s):

Company/Issuer:

Agent Name/Phone:

Policy Number:

Date Issued:

Premium:

Due Date:

Date Last Reviewed:

20 | THE 7-STEP RETIREMENT PLAN

INSURANCE SUMMARY (CONTINUED)

Make/Model:

Insured Name(s):

Company/Issuer:

Agent Name/Phone:

Policy Number:

Date Issued:

Premium:

Due Date:

Date Last Reviewed:

Other Insurance Name of Insured:

Policy Owner:

Company/Issuer:

Policy Number:

Date Issued:

Premium:

Due Date:

Date Last Reviewed:

21 | THE 7-STEP RETIREMENT PLAN

NOTES

22 | THE 7-STEP RETIREMENT PLAN

NOTES

23 | THE 7-STEP RETIREMENT PLAN

NOTES

24 | THE 7-STEP RETIREMENT PLAN

Wealth | Investments | Planning Commerce Trust Company

Contact a Commerce Trust advisor today. 1-855-295-7821 | commercetrustcompany.com NOT FDIC INSURED | MAY LOSE VALUE | NO BANK GUARANTEE

CTC1016-PC1412