The guide to my financial life - EMPOWER, ELEVATE, ACHIEVE: Not FDIC insured May lose value No bank guarantee
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EMPOWER, ELEVATE, ACHIEVE: The guide to my financial life Not FDIC insured May lose value No bank guarantee
Agenda
1 Women’s surging economic power
2 Preparing for your financial future
3 Financial life stages
4 How to take action
2
PPT002 316449 4/19
Women’s surging economic power
WOMEN’S SURGING ECONOMIC POWER
Women are poised to lead in controlling assets
• 95% of families will have a woman as the primary
financial decision maker at some point in their lives
51%
• Women are majority owners of 11.6 million businesses,
which generate $1.7 trillion in revenues
Women control 51%
of personal wealth
• Will control two thirds of the nation’s wealth by in the United States —
year 2030 about $14 trillion
Sources: Family Wealth Advisors Council, 2015; BMO Wealth Institute, 2015; National Association of Women Business Owners, 2017.
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WOMEN’S SURGING ECONOMIC POWER
Women face different challenges
INCOME DISRUPTION
EARNINGS GAP LONGEVITY
DUE TO CAREGIVING
Earn only 80 cents for Lose out on $324,044 Women now live, on
every dollar a man earns in wages and Social average, 86.7 years
Security to care for others versus males who live
84.3 years
Sources: Census Bureau 2018; Joint Economic Committee, 2016; Rice University, 2015; HealthView Services, 2017; Social Security Administration, 2018.
5
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WOMEN’S SURGING ECONOMIC POWER
Prepare for the challenge
DAILY EXPENSES SAVINGS RETIREMENT
• Electricity • Home • Income
• Travel • Emergency repairs • Legacy
• Utilities • Health • Charitable
• Clothes • Education • Business
• Vacation • Taxes
• Health
6
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WOMEN’S SURGING ECONOMIC POWER
Consider a bucket approach to manage savings priorities
SHORT-TERM INCOME (0–2 years) MID-TERM INCOME (2–10 years) LONG-TERM INCOME (10+ years)
Meet immediate cash-flow needs, Mix of growth and income, replenish Inflation hedge, address longevity risk
emergency fund, etc. short-term bucket, guard against
market volatility • Balance of stocks/bonds
• Cash • Real estate
• CDs/money market • Bonds • Longevity insurance
• Short-term bonds • Deferred annuities
• Immediate annuities • Absolute return funds
• Social Security, pension income • Asset allocation funds,
balanced funds
• Wages
7
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Preparing for your financial future
PREPARING FOR YOUR FINANCIAL FUTURE
Four things to talk to your financial advisor about
SOCIAL SECURITY
RETIREMENT SAVINGS
INVESTMENTS
FINANCIAL PLANNING
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PREPARING FOR YOUR FINANCIAL FUTURE
SOCIAL SECURITY
Social Security won’t cover it all
• Nearly 55% of Social Security recipients Women age 55‒64 earned 80 cents for
every dollar earned by men†
are women*
$57,304
• On average, Social Security only replaces Median annual
income of full-time
about 40% of pre-retirement earnings $42,224
worker (age 55-64)
What you can expect
from Social Security ‡
$18,252
$14,400
* ssa.gov/pubs/EN-05-10127.pdf Single men Single women
† Census Bureau, 2017.
‡ In today’s dollars. Average benefit retiring at age 65.
The maximum Social Security benefit in 2019 for an individual at full retirement age (66) is $34,332.
Sources: NWLC calculations based on U.S. Social Security Administration, Annual Statistical Supplement to the Social Security Bulletin, 2016, Bureau of Labor Statistics, 2016.
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PPT002 316449 4/19PREPARING FOR YOUR FINANCIAL FUTURE
RETIREMENT SAVINGS
Put time on your side by starting now
• On average, women may If your current
live longer in retirement: annual income is: You’ll need to save:
A 65-year-old woman can $50,000 $875,480
expect to live, on average, until
age 87, while a 65-year-old man $100,000 $1,750,960
can expect to live to age 84 $250,000 $4,377,401
Source: Putnam. Assumes 25-year retirement period, 100% of final annual income withdrawn each year, 6% annual return compounded monthly with a 3% annual inflation adjustment (inflation adjusted effective return is 3.08%).
11
PPT002 316449 4/19PREPARING FOR YOUR FINANCIAL FUTURE
INVESTMENTS
Start investing, stay invested
• Reduce risk by diversifying your $100,000 invested in the S&P 500 (12/31/03–12/31/18)
investments. Stayed fully invested
7.77% annualized total return $307,111
• By staying fully invested over the past Missed 10 best days
15 years, you would have earned over 2.96% $154,809
$150,000 more than someone who Missed 20 best days
0.03% $100,421
missed the market’s 10 best days.
$0 $50,000 $100,000 $150,000 $200,000 $250,000 $300,000 $350,000
Source: Putnam, December 2018. Data is historical. Past performance is not a guarantee of future results. The best time to invest assumes shares are bought when market prices are low. Diversification does not guarantee a profit or ensure against loss.
It is possible to lose money in a diversified portfolio.
12
PPT002 316449 4/19PREPARING FOR YOUR FINANCIAL FUTURE
FINANCIAL PLANNING
Financial planning
• 41% of women wish they had Five things that take money out of your pocket
invested more of their money*
• Just over half (52%) of women
say they are confident about
investing (compared with 68%
of men)†
* ml.com/women-financial-wellness-ag e-wave.html. “Women and Financial Wellness,” Merrill Lynch, 2017.
† mlaem.fs.ml.com/content/dam/ML/Registration/ml-womens-study.pdf
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PPT002 316449 4/19Financial life stages
FINANCIAL LIFE STAGES
Your financial life
LIFESTAGES
GROWING WEALTH ACCUMULATING WEALTH DISTRIBUTING WEALTH
• Millennials professionals • Established professionals • Retirees
• Beneficiaries/heirs • Business owners/Self-employed • Permanently disabled
• Spouses or Partners • Working mothers
• Spouses and Partners
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PPT002 316449 4/19FINANCIAL LIFE STAGES
Growing wealth: Establishing a framework for growth
FIVE ESSENTIAL LIFE STAGE COMPONENTS TO-DO LIST
1. Financial literacy: Take charge of Create or review your budget
your financial life Establish an emergency fund
2. Budgeting: Find direction in every Pay yourself first
day spending and saving Review employer-sponsored retirement
savings options
3. Savings: Create a plan to achieve
long-term goals Consider opening an IRA and HSA
Ask about systematic investing options
4. Debt: Investigate options for
building credit and repaying loans Establish a timeline for student loan repayment
Build credit intentionally
5. Insurance: Protect your hard work
Review insurance options:
by preparing for unforeseen
challenges Health
Disability
Life
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PPT002 316449 4/19FINANCIAL LIFE STAGES
Accumulating wealth: Creating your retirement nest egg
FIVE ESSENTIAL LIFE STAGE COMPONENTS TO-DO LIST
1. Financial literacy: Be engaged in Annually review retirement accounts
your financial life If applicable, understand basics of retirement
2. Advanced planning: Optimize your account consolidation
personal savings for future goals Adjust contributions if necessary
Review beneficiary designations
3. Family considerations: Help
support your loved ones If applicable, ask about 529 plans and college
savings options
4. Legacy building: Establish a plan to
support what’s important to you Understand future benefit options such as Social
Security and Medicare
5. Tax management: Defend the
If applicable, discuss considerations for company stock
wealth that you’ve built
in retirement plans
Investigate estate planning considerations
Pursue tax diversification in accounts
17
PPT002 316449 4/19FINANCIAL LIFE STAGES
Distributing wealth: Enjoying your retirement years
FIVE ESSENTIAL LIFE STAGE COMPONENTS TO-DO LIST
1. Financial literacy: Sharing your Annually review your health care coverage options
knowledge with loved ones Discuss Medicare enrollment options with a
2. Health care: Plan for unforeseen professional
expenses Decide when you will begin collecting Social Security
3. Income planning: Optimize your Review budget and bucketed savings approach
withdrawal strategy Incorporate tax smart withdrawal strategies
4. Long-term care: Understanding Consider charitable giving strategies
your options
Investigate long-term care living options
5. Estate planning: Leave a legacy for
your loved ones Introduce your heirs to your financial advisor
Prepare for wealth transfer conversations
18
PPT002 316449 4/19FINANCIAL LIFE STAGES
Planning and preparing for the unexpected
FIVE CONSIDERATIONS FOR THE UNEXPECTED TO-DO LIST
1. Share knowledge: Keep an open Complete and retain important documents
dialogue with loved ones Medical directives
2. Important documents: Ensure its Beneficiary designations
easy for others to access Power of attorney
3. Support network: Work with Establish a “backup” budget in case of sudden
qualified professionals who income loss
can help
Consult a financial advisor for referrals to:
4. Financial protection: Defend what CPA
you’ve worked to build
Lawyer/Estate planner
5. Continued education: Stay
Schedule a family meeting with spouses, partners, and
informed on what matters most
heirs to develop:
“I love you” letter
Financial emergency preparedness plan
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PPT002 316449 4/19FINANCIAL LIFE STAGES
Special considerations for widows and divorced individuals
FIVE CONSIDERATIONS FOR THE NEWLY INDEPENDENT TO-DO LIST
1. Seek support: Keep an open dialogue Update important documents
with loved ones Beneficiary designations
2. Important documents: Ensure its Power of attorney
easy for others to access Medical directives
3. Income planning: Work with qualified Work with a financial advisor to navigate:
professionals who can help Lifetime income risk
4. Asset protection: Defend what you’ve Social Security considerations
worked to build Insurance coverage updates
5. Tax considerations: Stay informed on Tax considerations
what matters most Secure credit by reviewing credit score and history
Review employee benefits, and, if applicable, consider
coverage for children
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PPT002 316449 4/19How to take action
HOW TO TAKE ACTION
Put your plan into action
• Take inventory of your financial goals
• Review the guide to your financial life with a
qualified financial advisor
• Share knowledge to empower other women
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PPT002 316449 4/19Appendix: A deeper look
RELATED PLANNING IDEAS
Sequence risk: When you retire can make a big difference
Assumptions Portfolio balance remaining after
10 years of withdrawals
• $1 million portfolio
Retire in 1980 Retire in 1990 Retire in 2000
• 5% withdrawn annually and increased each
$1,861,592
year to keep up with inflation $1,731,989
• Invested in a portfolio of
60% stocks, 30% bonds, and 10% cash
-$472,238
Source: Putnam research, December 2018.
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Income: Importance of guaranteed sources
Example Probability of portfolio
survival over 30 years
• Balanced portfolio:
60% stocks, 30% bonds, 10% cash
• 5% withdrawn annually 77% 94%
• Guaranteed income based on current immediate
annuity rates No guaranteed 25% guaranteed
income income
This example is based on rolling historical time period analysis and does not account for the effect of taxes, nor does it represent the performance of any Putnam fund or product, which will fluctuate. Assumes historical rolling periods from 1926 to 2015 of
stocks (as represented by an S&P 500 composite), bonds (as represented by a 20-year long-term government bond (50%) and a 20-year corporate bond (50%)), and cash (as represented by U.S. 30-day T-bills) to determine how long a portfolio would have
lasted given a 5% withdrawal rate. A one-year rolling average is used to calculate performance of the 20-year bonds. Guaranteed income is based on a single premium, immediate annuity for a 65-year-old male assuming single life expectancy at current
(August 2016) annuity rates. Past performance is not a guarantee of future results. The S&P 500 Index is an unmanaged index of common stock performance. You cannot invest directly in an index.
Source: Putnam research, December 2018.
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PPT002 316449 4/19RELATED PLANNING IDEAS
Choose the right withdrawal rate
Percentage of your portfolio’s original balance withdrawn each year
3%
will last
50 years
4% Allocation
will last
33 years CASH 10%
5%
will last 6% 7%
20 years will last 8% 9% 10% STOCKS 60%
will last
16 years will last will last
13 years will last
12 years 11 years 10 years
This example assumes a 90% probability rate. These hypothetical illustrations are based on rolling historical time period analysis and do not account for the effect of taxes, nor do they represent the performance of any Putnam fund or product, which will
fluctuate. These illustrations use the historical rolling periods from 1926 to 2015 of stocks (as represented by an S&P 500 composite), bonds (as represented by a 20-year long-term government bond (50%) and a 20-year corporate bond (50%)), and cash
(as represented by U.S. 30-day T-bills) to determine how long a portfolio would have lasted given various withdrawal rates. A one-year rolling average is used to calculate performance of the 20-year bonds. Past performance is not a guarantee of future
results. The S&P 500 Index is an unmanaged index of common stock performance. You cannot invest directly in an index.
Source: Putnam research, December 2018.
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Optimizing Social Security
Considerations
• Only source of guaranteed income for $2,660
many retirees
Monthly benefits
$1,983 increase as you
• Risk of taking too early
delay Social Security
$1,394
• Consider maximizing survivor benefit
to address longevity risk Social Security Quick Calculator benefit estimate
based on an individual age 62 with $75,000 in
current earnings. Does not include increases in
• Special rules apply for divorced and benefit levels due to regular cost-of-living
adjustments.
widowed retirees Age 62 Age 66 Age 70
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PPT002 316449 4/19RELATED PLANNING IDEAS
Understand Medicare and Supplemental coverage
PART A (Hospital) PART B (Doctor) PART D (Drug)
• Generally no premium • Doctor visits, outpatient • Optional prescription drug
• Nursing care, hospital stays, procedures, tests, therapy, coverage
home health, hospice, x-rays, etc. • Offered by private insurance
limited nursing home care • Base premium of $135.50 per companies that are approved by
• Annual deductible month with a deductible of Medicare
of $1,364 (hospital inpatient) $185/year • Maximum annual deductible
• 80/20 coverage — no coinsurance cannot exceed $415.00
for most preventative services
Based on 2016 rates. Medicare beneficiaries who are currently receiving Social Security benefits are not subject to an increase of their Part B premium in 2016 due to the hold harmless clause. A hold harmless provision in the Social Security Act
disallows an increase in the Medicare Part B premium for qualifying Social Security recipients if their COLA is not large enough to cover the increase in the Part B premium. For that group, the Part B base premium will remain at $104.90.
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PPT002 316449 4/19RELATED PLANNING IDEAS
Make sure you have supplemental coverage
MEDICARE ADVANTAGE (Part C) MEDIGAP POLICY
• Private alternative to Medicare Parts A • Offered through private insurance
and B — must have at least equivalent companies
benefit, regulated by Medicare • Extra insurance that will cover certain
• Generally offers additional benefits, such as expenses not covered by Medicare such
vision, dental, and hearing, and many as deductibles, copays, and uncovered
include prescription drug coverage services
• Eliminates some Medicare co-payments and • Premiums will vary by area and are paid
deductibles separately from Medicare Part B and D
• Plans have service areas — most coverage premiums
offered through an HMO or PPO network • Generally higher cost than Medicare
Advantage but lower out-of-pocket expense
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PPT002 316449 4/19RELATED PLANNING IDEAS
Applying NUA treatment on company stock
Example
Participant contributes $300,000
Rolling over company stock Electing NUA treatment
$50,000 into company
Total taxes due: Total taxes due:
stock within their
$111,800 $68,500
employer-sponsored $250,000 NUA
retirement plan, which ($300,000 x 37% income ($50,000 x 37% income tax
tax rate) rate, $250,000 x 20% capital
appreciates in value at gains rate)
retirement to $300,000. $50,000 COST BASIS
Example assumes maximum 37% income tax bracket and 20% capital gains rate.
Source: Putnam, January 2019.
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PPT002 316449 4/19RELATED PLANNING IDEAS
Understanding the impact of tax diversification
Tax diversification offers some distinct benefits:
1. Flexibility to draw income from different sources depending on your tax situation and
changes in overall life circumstances
2. Opportunity to hedge your portfolio against the direction of tax rates, which could move
higher in the future
TAXABLE ASSETS TAX-DEFERRED ASSETS TAX-FREE ASSETS
• Savings accounts and CDs • Traditional IRAs • Roth IRA and Roth 401(k)
• Brokerage accounts • Retirement plans • Municipal bonds
• Mutual funds (e.g., 401(k), 403(b)) • College savings accounts
• Annuities (e.g., 529)
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PPT002 316449 4/19All funds involve risk, including the loss of principal.
This material is for informational and educational purposes only. It is not a recommendation of any specific investment product, strategy, or
decision, and is not intended to suggest taking or refraining from any course of action. It is not intended to address the needs, circumstances, and
objectives of any specific investor. This information is not meant as tax or legal advice. Investors should consult a professional advisor before
making investment and financial decisions and for more information on tax rules and other laws, which are complex and subject to change.
Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund before investing. For a prospectus,
or a summary prospectus if available, containing this and other information for any Putnam fund or product, call your financial
representative or call Putnam at 1-800-225-1581.
Please read the prospectus carefully before investing.
putnam.com
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PPT002 316449 4/19Your financial wellness can influence your lifestyle.
In this presentation, we want to focus on three goals:
Empower — Illustrate how women represent a growing economic driver
Elevate — Expand awareness of key considerations, such as health care, longevity, and investing for
the future.
Excel — Provide strategies to help women achieve short- and long-term goals.
PUTNAM INVESTMENTS PPT002 316449 4/19
1At today’s meeting we will review:
• Facts about women’s surging economic power
• How to prepare for your financial future
• Identify and manage financial life stages
• How to take action to achieve goals
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2PUTNAM INVESTMENTS PPT002 316449 4/19
3It has only been in the last 60 years that women gained financial equality in the eyes of the law:
• Prior to 1971: States could give preference to men over women in assigning estate administrators
• Prior to 1974: Women couldn’t apply as an individual for credit cards
• Prior to 1981: Husbands could have unilateral control over joint property
• Prior to 1988: It was legal to require a male relative’s signature on a business loan
Women are now poised to lead in controlling assets:
• 95% of families say that a woman will be the primary financial decision maker at some point in
their lives
• Women are majority owners of almost 12 million businesses today that generate close to
$2 trillion in revenue
• And, most importantly, women control over half of the personal wealth in the U.S. today, and
that is expected to increase to two-thirds by 2030
PUTNAM INVESTMENTS PPT002 316449 4/19
4There are three key challenges that women still face when preparing for retirement:
1. The Earnings Gap
• While progress has been made, women still earn 80 cents for every dollar that a man earns. Census
Bureau, 2018 (based on 2017 data)
• Lower career earnings mean less retirement income. The median income for women age 65 and older
is $17,400 — 44% less than the median income for men of the same age ($31,200) (Joint Economic
Committee, 2016)
2. Caregiving
• Caregiving is another factor that can reduce income, and 66% of caregivers are women. Women are
more likely to take on the caregiving role for children and elderly parents, requiring that they either
reduce hours at work, give up a promotion, or temporarily leave the workforce. (Family Caregiver
Alliance, 2015)
• In total, the cost impact of caregiving on the average female caregiver in terms of lost wages and Social
Security benefits is estimated to be $324,044. (Rice University, 2015)
3. Longevity
• Women live longer than men. A woman turning 65 years old today can expect to live to age 86.7 on
average, compared with 84.3 for men (Social Security Administration, 2018). They also need to
financially prepare for more years in retirement because they live longer and on average, marry older
men. Health-care costs, which are already rising, have a disproportionate impact on women because
they live longer. This creates many challenges for women if they have not properly planned.
• Many women could face a four-year window where they will be solely responsible for household
expenses including health care. (HealthView Services, 2017)
PUTNAM INVESTMENTS PPT002 316449 4/19
5Economic challenges grow more complex over time. Women may need to focus on a comprehensive
financial plan and save more as they face the impact of the earnings gap and longevity trends.
In order to overcome these challenges, it is critical to understand how much of a nest egg you need
to build to replace your current income in retirement:
• If your current annual income is $50,0000, you will need $890,000
• If your current annual income is $100,000, you will need to save $1,800,000
• If your current annual income is $250,000, you will need $3,600,000
This assumes a 6% rate of return on savings with a 3% rate of inflation. (Source: Putnam research,
September 2017.)
PUTNAM INVESTMENTS PPT002 316449 4/19
6One strategy for managing current spending and future savings goals is to consider a bucket
approach. There are many different versions of this strategy.
In order to meet current income needs and prepare against any short-term circumstances, a portion
of the overall savings would be invested in liquid accounts (CDs, money market, etc.). For the mid-
term and longer-term buckets, accounts would be allocated according to their investment objective.
For example, the longer-term bucket might consist of growth stocks or funds, real estate, and
commodities in order to keep up with inflation and protect against the risk of outliving your assets.
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7PUTNAM INVESTMENTS PPT002 316449 4/19
8When working with a financial advisor, consider these topics to help drive your discussions. Over the
next few slides, we will review each of these areas in greater detail.
1. Social Security
2. Retirement savings
3. Investments
4. Financial planning
PUTNAM INVESTMENTS PPT002 316449 4/19
9Equal pay has been the law since 1963. But today, women are still paid less than men — even with
similar education, skills, and experience.
In 2017, working women ages 55–64 were paid only 80 cents for every dollar a man was paid,
according to the Census Bureau.
Over time, this gap in earnings will have an impact on a woman’s ability to save during her working
years — and on her Social Security benefit, which is based on work and salary history.
In 2017, the Bureau of Labor Statistics (2016 data) reported that the earnings gap could cost a
woman more than $1,055,000.
(Source: Bureau of Labor Statistic; TED: The Economics daily, Median usual weekly earnings of
women and men who are full-time wage and salary workers, by age, 2016 annual averages. Age
Wave Analysis.)
A woman would have to work an extra 10 years to make up the wage gap. (National Women’s Law
Center 2017).
Another factor influencing earnings is that women are more likely than men to take on the role as a
caregiver of children or elderly parents. More than one third of caregivers reduce their work hours or
leave the workforce.
While Social Security is one source of income, it’s important to understand that it will provide only a
fraction of the income needed in retirement. Many people over-estimate the amount of income they
will receive from their savings and, as a result, rely more heavily on Social Security to pay the bills.
PUTNAM INVESTMENTS PPT002 316449 4/19
10To maintain your standard of living in retirement, you will have to make up the difference
through your own savings and investments.
The maximum Social Security benefit in 2019 for an individual at full retirement age (66) is
$34,332.
If you are married, it’s important to note that the age at which your spouse starts taking Social
Security benefits can affect your long-term benefits. Most married men start claiming Social
Security benefits at age 62 or 63, far short of the age that maximizes the value of the average
benefit. What results is a much lower long-term survivor benefit amount. If your husband
postpones his claim, it could significantly increase your long-term benefit.
PUTNAM INVESTMENTS PPT002 316449 4/19
‹#›Because of longevity, women are in a unique position when it comes to saving for retirement. A
woman who is age 65 today can expect to live on average until 86.7 years of age. In fact, the majority
of people who are age 85 or older today are women.
A consequence of longevity is that, statistically, people pay an increasing amount for health care and
related expenses as they age. Health-care spending is projected to rise 5.8% annually over the next
10 years. Therefore, women need to make sure that retirement planning takes into account a longer
life span and an increase in health-care costs.
One way to prepare for this challenge is to avoid procrastination. Put time on your side by starting
now.
PUTNAM INVESTMENTS PPT002 316449 4/19
11Over the past 70 years, there have been 13 bear markets, lasting an average of 13 months and
declining a total of 25.8% before recovering. By contrast, the 14 bull markets since 1949 have lasted
roughly 47 months on balance, each growing an average of 124.6%
Although selling may feel better in times of market turbulence, the fact is that market gains have
more than made up for losses for those investors who stay invested over time.
PUTNAM INVESTMENTS PPT002 316449 4/19
12• 41% of women say their biggest financial regret is not investing more.
• About half of women versus 68% of men say they are confident about investing. Strong financial planning
and supportive advice can help close that confidence gap because it can help us navigate the five things
that take money out of our pocket as we balance our current spending needs with saving for the future.
Taxes:
• At current federal income tax rates, one dollar inside a traditional retirement plan or IRA may only provide
60 cents of income once taxes are accounted for (assuming the highest current income tax bracket of
37.0%). Since many retirees hold a large portion of their savings inside these traditional retirement
accounts and IRAs, taxes can have a major impact on their ability to generate necessary income.
Inflation:
• A dollar today will likely be worth less at retirement because of inflation.
• While it is difficult to predict inflation rates, even a 3.2% rate of inflation (just below the historical average of
3.43%) can have a significant impact on purchasing power and standard of living.
• Consider how the cost of a new home has risen over the years. The average cost of a new home was
$143,000 in 1991. Yet by 2016, the average price was $384,000 and that’s expected to rise to $843,964 by
2041.
Low Interest Rates:
• Between 1994 and 1995, the 10-year treasury bond had a yield of around 8%. Today, the yield is just above
3%. This means that you are earning less from your long-term fixed income investments, and even less in
your liquid savings accounts.
PUTNAM INVESTMENTS PPT002 316449 4/19
13Health Care Costs:
• It’s clear that health-care costs are rising and pose a significant challenge for retirees. But how do
health-care costs compare with overall inflation and wages from employment? The answer is
striking.
• Over the past decade, health-care costs have risen cumulatively by more than 200% while inflation
(as measured by historical CPI) has risen roughly 47% and wages only 64%. (Kaiser Family
Foundation, 2017)
• Costs are expected to grow significantly in the future
• Health-care spending increases significantly with age
Procrastination:
• The biggest challenge is an individual’s own fear of getting started. Which is exactly why it is
important to have discussions like we are having today, and why it is important to work with a
professional who can help you craft a unique roadmap tailored to your own financial life.
PUTNAM INVESTMENTS PPT002 316449 4/19
‹#›PUTNAM INVESTMENTS PPT002 316449 4/19
14As you navigate your financial life, there are several identifiable life stages:
Growing Wealth: This group of individuals are establishing their financial lives. Perhaps this is a
millennial woman just entering the workforce or your younger beneficiaries and heirs who are
focused on broadening their financial literacy.
Accumulating Wealth: These are established professionals who have careers or who are helping to
manage the household. They are further along on their financial journey and may have started to
develop a more substantial nest egg for their retirement. Their financial planning needs may be more
complex. For example, they may have multiple retirement accounts or are navigating their finances
in combination with income from a partner.
Distributing Wealth: These are individuals who are no longer generating income through
employment. For the first time, they are living off of the wealth they’ve accumulated by generating
an income stream. We typically associate this stage with those in retirement, but this category could
also include someone with a long-term disability that inhibits them from working.
It is important to plan for each financial life stage, as well as unexpected events that can impact your
financial roadmap. Some of these events include sudden disability or illness, career changes, sudden
cash windfalls, becoming a caregiver, and starting a family.
Over the next few slides, we will take a deeper look at each of these life stages by reviewing the Top
Five Essential Life Stage Components and a to-do list that you can use to help drive your
conversations with loved ones and the financial professionals you work with.
PUTNAM INVESTMENTS PPT002 316449 4/19
15For individuals starting to take control of their finances, there are five key areas for discussion:
1. Financial literacy
2. Budgeting
3. Savings
4. Debt
5. Insurance
Consider the following to-do list:
• Create or review your budget
• Establish an emergency fund
• Consider retirement savings options
• Student loan repayment
• Building credit
• Review insurance options
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16PUTNAM INVESTMENTS PPT002 316449 4/19
17At this stage, the focus is on the distribution of wealth. Here are five essential components for
discussion:
1. Financial literacy
2. Health care
3. Income planning
4. Long-term care
5. Estate planning
On the to-do list, consider these items to review with an advisor:
• Review health coverage options
• Determine when to claim Social Security
• Review budget and savings approach
• Long-term care options
• Introduce heirs to your advisor
• Prepare for wealth transfer
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18As we all realize, life stages do not always flow smoothly and individuals need to be prepared for
unexpected changes and transitions. We cannot prepare for everything, but there are a number of
considerations when planning for the unexpected:
1. Share knowledge with loved ones
2. Update important documents
3. Utilize a network of professionals
4. Financial protection
5. Continued education
A to-do list to discuss with an advisor may include:
• Maintain important documents
• Have a backup budget
• Ask your advisor for referrals (CPA, etc.)
• Hold a family meeting with partners
• Write an “I love you” letter
• Discuss financial emergency preparedness
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19For unexpected transitions, such as the loss of a spouse through death or divorce, there are many
planning considerations. Topic to discuss with an advisor include:
1. Seek support
2. Update important documents
3. Income planning
4. Asset protection
5. Tax considerations
On a to-do list:
• Update documents
• Work with an advisor to navigate income risk
• Social Security
• Insurance coverage updates
• Tax considerations
• Secure credit
• Review employee benefits
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‹#›PUTNAM INVESTMENTS PPT002 316449 4/19
21We’ve covered a lot today. So, how do you get started following this conversation. Consider the
following steps.
• Take inventory of your financial goals
• Review the guide to your financial life with a qualified financial advisor
• Share knowledge to empower other women
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23When you retire can also have a major impact on your financial success in retirement. The math
behind withdrawing or distributing assets IN retirement is much different than saving, or
accumulating assets FOR retirement.
If you begin withdrawing from a portfolio during a deep market downtown — like the latter half of
2008 for example — you have to liquidate more shares to create the same amount of income
(because of the decline in the value of those shares). This is often referred to as “sequence of returns”
risk.
If you analyze three different scenarios — retiring in 1980, retiring in 1990, or retiring in 2000 — it’s
clear that timing can make a huge difference in outcomes. Those who retired and began withdrawals
in 1980 or 1990 fared well over the first 10 years of their retirement (based on the given assumptions).
In fact, even with taking 5% withdrawals each year adjusted for inflation, after 10 years the value of
the initial $1 million nest egg had risen dramatically. Conversely, those retiring in 2000 didn’t fare as
well. Their retirement nest egg was decimated first in early 2000 when the tech bubble burst and
then again in 2008/2009 with the credit crisis and ensuing “Great Recession.” For this reason, it’s
critical that retirees invest to avoid potential sharp market downturns or “shocks” when they are
withdrawing assets from their portfolio.
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24One of the biggest differences current and future retirees face compared with previous generations is
the lack of guaranteed income in retirement. The transition from Defined Benefit pension plans to
Defined Contribution plans places more responsibility on the individual retirees to manage and draw
down those assets in retirement. Incorporating guaranteed income as part of an overall plan can
help avoid market-related “shocks” and provide a “floor” of income.
Consider this example of a balanced portfolio with 5% being withdrawn annually, to be increased
each year to account for inflation. Based on historical results, this portfolio would have survived 77%
of the time. Meaning that, at the end of roughly 30 years the portfolio would not run out of money.
Now, what if we allocated 25% of the portfolio to create a guaranteed income stream? Based on
current immediate annuity rates for a 65-year-old male, adding guaranteed income would increase
the survival likelihood of the remaining variable portfolio from 77% to 94%. Basically, since there is a
guaranteed stream of income, there is less stress on the remaining portfolio to achieve the goal of a
5% income stream adjusted annually for inflation.
Of course, committing funds to an annuity product involves relinquishing control over those funds in
many cases. However, there are other products such as Guaranteed Minimum Withdrawal Benefits
(GMWBs) that provide some additional flexibility to the contract owner, albeit at a higher cost.
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25One of the important expectations to manage is how much you can withdraw from your portfolio if
you want it to last. This idea is called “sustainable withdrawals.”
This chart takes a balanced portfolio mix of 60% equities, 30% fixed income, and 10% cash, then
shows how long it would last at different withdrawal rates. What’s interesting is that because we’re
dealing in percentages, the dollar amount of your nest egg doesn’t matter. Whether you have $100 or
$100,000, 50% is still half.
The chart shows that if you took 10% out of your savings each year, you could have expected your
savings to last about 10 years. Based upon this mix, a 6% annual withdrawal rate, increased each
year to keep up with inflation, would have lasted around 16 years.
The message here is that you should try to limit your withdrawals to no more than 5%, given what
we know about how long you are likely to spend in retirement.
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26For today’s retirees, the importance of making the right decisions around Social Security cannot be
overstated. Generally, people are living longer and many do not have access to traditional pension plans
providing guaranteed lifetime income. With the rise of defined contribution plans, Social Security will be the
only source of guaranteed income for many in retirement.
In fact, for 61% of elderly beneficiaries, Social Security provides the majority of their cash income. Claiming
Social Security early locks you into a lower monthly benefit amount for the rest of your life. In fact, many
retirees opt to take benefits early resulting in lower lifetime income for them and potentially their surviving
spouse. Many underestimate life expectancy. Married couples without guaranteed income should consider
options to maximize the survivor benefit for whichever spouse lives the longest, especially in cases where one
spouse was the primary earner. They need to think in terms of joint life expectancy, not just that of the worker.
Lastly, there are special rules which apply to divorced and widowed individuals. Divorced individuals may
receive benefits based on the ex-spouse’s earnings record. There are certain conditions that must be met:
• The marriage lasted 10 years or more
• The ex-spouse is eligible for Social Security benefits (even if he or she has not filed for benefits yet)
• The spouse making claim on the ex-spouse’s record is unmarried and age 62 or older
Unlike spouses or ex-spouses, widows may receive benefits as early as age 60. However, the benefit amount
for beginning benefits that early would be 71.5% of the full amount and is based on the deceased spouse’s
earnings. The longer benefits are delayed, the greater the amount. However, unlike retirement benefits,
survivor (and spousal) benefits do not increase if claimed after full retirement age. Lastly, survivor benefits are
lost if you remarry prior to age 60, unless that marriage ends in divorce or death.
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27Here’s a summary of the three main parts of Medicare — Part A for hospitalization, Part B for
doctor visits, and Part D for prescription drug coverage.
Medicare Part A
There is no premium, assuming you paid Medicare payroll taxes while working. Part A provides
inpatient care in hospitals, skilled nursing facility care, hospice care, and home health care. For
long-term care in a nursing home, you pay nothing for the first 20 days of each benefit period, a
coinsurance for days 21 to 100 of each benefit period, and all costs for each day after 100 days in
a benefit period.
Medicare Part B
Medicare Part B (Medical Insurance) helps cover medically necessary doctors’ services,
outpatient care, home health services, durable medical equipment, and other medical services.
Part B also covers many preventative services. You pay nothing for most covered preventive
services if you get the services from a doctor or other qualified health-care provider who accepts
assignment.
Medicare Part D
There are two ways to get Medicare prescription drug coverage. One is through Medicare
Prescription Drug Plans. These plans (sometimes called “PDPs”) add drug coverage to Original
Medicare, some Medicare Cost Plans, some Medicare Private Fee-for-Service (PFFS) plans, and
Medicare Medical Savings Account (MSA) plans. You must have Part A or Part B to join a Medicare
Prescription Drug Plan. The second is through Medicare Advantage Plans (like HMOs or PPOs)
that offer prescription drug coverage.
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28Note that some of the items and services that Medicare doesn’t cover are most dental care,
eye examinations related to prescribing glasses, dentures, cosmetic surgery, acupuncture,
and hearing aids and exams for fitting them.
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‹#›Since original Medicare includes deductibles and coinsurance that could lead to significant out-of-pocket
expenses in retirement, many retirees opt for supplemental insurance to cover these costs.
First, Medicare Advantage (MA) plans that bundle Parts A, B, and D coverage into one policy. There are
several types, including:
Medicare Preferred Provider Organization (PPO) — A network of doctors, clinics, hospitals, and other
health-care providers. With this type of plan, you don’t have to choose a primary care physician up front
to coordinate your care.
Medicare Health Maintenance Organization (HMO) — A plan in which you choose a primary care
physician who will coordinate your care and refer you to any specialists you have to see. An HMO typically
has a network of health-care professionals, and going outside of that network could require you to pay
completely out-of-pocket for any services.
Other plans — Medicare Private Fee-for-Service (PFFS), Medicare Special Needs Plans (SNPs), and
Medicare Medical Savings Account (MSA).
Alternatively, some retirees opt for original Medicare and purchase a separate Medigap policy to cover at
least some of the out-of-pocket expenses. Here’s some additional information on Medigap plans:
• You pay the private insurance company a monthly premium for your Medigap policy in addition to the
monthly Part B premium that you pay to Medicare
• A Medigap policy only covers one person. If you and your spouse both want Medigap coverage, you'll
each have to buy separate policies
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29• You can buy a Medigap policy from any insurance company that's licensed in your state
• Policies are grouped by letters A through N — All plans with the same letter must offer the same
base benefits (certain plan types are not available to new subscribers)
• No higher premiums for those with pre-existing conditions who enroll during the open enrollment
period (6-month period when you reach age 65 and are enrolled in Medicare Parts A and B)
• Any standardized Medigap policy is guaranteed renewable even if you have health problems. This
means the insurance company can't cancel your Medigap policy as long as you pay the premium
• Medigap policies generally don't cover long-term care, vision or dental care, hearing aids,
eyeglasses, or private-duty nursing and do not provide prescription drug coverage
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‹#›For retirees holding company stock in their qualified retirement plan, they may have another option
in addition to rolling over the stock into a Rollover IRA. Under IRC section 402(e)(4) the IRS allows
special tax treatment on the distribution of employer stock from an ERISA plan. Upon distribution
(not rollover), only the cost basis of the stock is taxable income. There is no tax on the appreciation
of the stock until it is sold, and then long-term capital gains treatment applies. This may create tax
savings since retirement distributions are ordinarily taxed as ordinary income rates, which are
currently higher than the capital gains rate.
Here’s a quick example:
Participant contributes $50,000 toward the purchase of company stock in their retirement plan
Over time this grows to $300,000 — the $250,000 in market gains is known as the NUA (net unrealized
appreciation)
The benefit is the difference in taxes paid ($50,000) on the $300,000 distribution from the company
plan (assuming a 20% long-term capital gains rate, and 37% income rate)
The more the stock has appreciated within the plan and the higher the tax rate expected in
retirement, the better the prospect for using the NUA strategy. Note that there are several
requirements before being able to apply NUA treatment. First, the distribution from the plan must be
a lump-sum distribution (all funds distributed from the plan during the calendar year). The stock
must be transfer in-kind (not sold or rolled over) to a brokerage account.
* Clients should consult a qualified tax professional when considering this strategy as certain
requirements apply.
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30Being mindful of the tax status of assets in retirement and how funds are allocated among them, is
an important aspect of planning when considering potential tax exposure in the future.
One of the challenges many retirees face is that a disproportionate percentage of their overall
savings is held in tax-deferred retirement accounts that can be taxed at a rate as high as 37% upon
withdrawal.
Retirees who have a large majority of their savings in traditional retirement accounts could be in for
a surprise when they have to pay taxes.
Creating tax diversification means allocating assets over time across taxable, tax-deferred, and tax-
free sources.
Tax diversification offers several benefits:
• Flexibility to draw income from different sources depending on your tax situation and changes in
overall life circumstances
• May help your portfolio last longer
• Allows you to hedge your portfolio against the direction of tax rates, which could be higher in the
future.
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