The
New
Rules of
Saving
For Your
Future
All information sources cited in this
presentation are available upon request.
Presented by: Martin H. Ruby, FSA
Stonewood Financial Solutions
1985
vs.
2015
Meet Jim
Things That Were Popular in 1985
Things That Are Popular in 2015
Savings Environment: 1985 vs. 2015
The Stock
Market
Start of the “Great
Bull Market” with
high interest rates
“The Federal Reserve
Bubble” with low
interest rates
High with
Potential Looming
Tax Hikes: Debt
102% of GDP
Taxes
High with
Looming Tax Cuts:
Debt 40% of GDP
Health
Care Costs
10.2% of GDP
18%+ of GDP
Age 74.7
Age 79.1
Life
Expectancy
http://articles.latimes.com/1986-01-02/business/fi-23654_1_bull-market; http://www.irs.gov/pub/irs-soi/85inintxr.pdf;
https://research.stlouisfed.org/fred2/series/GFDEGDQ188S/; http://www.huffingtonpost.com/2013/09/18/health-care-spending_n_3948568.html;
http://www.huffingtonpost.com/2013/09/18/health-care-spending_n_3948568.html; http://altarum.org/health-policy-blog/u-s-health-spending-as-ashare-of-gdp-where-are-we-headed; http://www.data360.org/dsg.aspx?Data_Set_Group_Id=195
1985: What We Thought Retirement Planning Would Be
Retirement
2015: What We Know Retirement Planning To Be
Retirement
Risks
Risks
Buckets of Funds in Retirement
Living Expenses
(Base Income)
•
•
•
Pension
401(k)/ IRA
Social
Security
Lifestyle Expenses
(Additional Income)
•
•
•
•
•
401(k)
IRA
CD Savings
Annuities
Savings
Account
Emergency Savings
(Rainy Day Fund)
•
•
Savings
Account
LTC
Insurance
Legacy Savings
(Inheritance)
•
•
•
401(k)
Savings
Account
Life
Insurance
1985
What worked:
 Putting your funds in
the market.
 Earning meaningful
returns on more
secure vehicles
http://articles.latimes.com/1986-01-02/business/fi-23654_1_bull-market
Total Return of the Stock Market (including dividends)
$280,000
$260,000
$186,428
4.2% average
annual return
$240,000
$220,000
$200,000
-1% average
annual
return
$180,000
$160,000
13.69%
32.39%
$140,000
16.00%
$120,000
15.79%
5.49%
15.06%
2.11%
$100,000
$80,000
10.88%
-9.10%
-11.89%
$60,000
4.91%
26.46%
28.68%
-37.00%
-22.10%
$40,000
00
01
02
03
04
05
06
07
08
09
10
11
12
13
14
Annual Total Return of the S&P 500
Data used to create this chart was obtained from: Yahoo Finance GSPC Historical Prices
This example is for illustrative purposes only and should not be deemed a representation of future results, and is no guarantee of return or
future performance. This information is not intended to provide any tax, legal or investment advice or provide the basis for any financial decision.
Be sure to speak with a qualified professional before making any decisions about your personal situation.
Low Interest Rates and Today’s Saver
US 10-Year Treasury Rate
12
10
8
6
4
2
0
1985
1990
1995
2000
2005
2010
2014
2015
US 10-Year Treasury Rate
Source: U.S. Treasury – Treasury Yield Rates
Data used to create this chart was obtained from: www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.asp
This information is not intended to provide any tax, legal or investment advice or provide the basis for any financial decisions. Be sure to speak
with qualified professionals before making any decisions about your personal situation.
2015
What works:
 Finding ways to
achieve meaningful
growth while also
protecting funds
from market
fluctuations.
1985
What worked:
 Assuming you’d
be in a lower tax
bracket in the
future.
 Not worrying
about future tax
burden
This information is not intended to provide tax, legal or investment advice. Be sure to speak with qualified professionals
before making any decisions about your personal situation.
Taxation as You Accumulate Funds
Taxable
•
•
•
•
•
•
Stock accounts
Brokerage accounts
CDs
Money Market Funds
Savings Accounts
Social Security
Tax Deferred
•
•
•
•
•
401(k)s
403(b)s
Traditional IRAs
Tax-deferred
Annuities
Savings Bonds
Tax Free
•
•
•
•
Roth 401(k)s
Roth IRAs
Life Insurance
Municipal Bonds
This information is not intended to provide tax, legal or investment advice. Be sure to speak with qualified professionals before making any
decisions about your personal situation.
Benefits of Your Tax Strategy
Tax Status
Benefits
Drawbacks
Taxable
May be the only way to
access the kind of assets
you want
You must pay taxes on
your earnings every year
Tax Deferred
No annual taxes on
earnings
When funds are
withdrawn, you must pay
taxes on earnings, and in
some cases on
contributions, too
Tax Free
No taxes paid on earnings
in the account
You must use after-tax
dollars to fund these
assets
This hypothetical example does not consider every product or feature of tax-deferred accounts and is for illustrative purposes only. It should not be deemed a representation of past or future
results, and is no guarantee of return or future performance. This information is not intended to provide tax, legal or investment advice. Be sure to speak with qualified professionals
before making any decisions about your personal situation.
Are Taxes
Going Up
or Down?
This information is not intended to provide tax, legal or investment advice. Be sure to speak with qualified professionals
before making any decisions about your personal situation.
Four Ways You Can End Up
Paying More Taxes Than Planned
Move Into
a Higher
Tax
Bracket
Raise
All Tax
Rates
Lose Tax
Deductions
Enact
“Stealth”
Taxes
This information is not intended to provide tax, legal or investment advice. Be sure to speak with qualified professionals
before making any decisions about your personal situation.
2015
What works:
 Tax diversification
 Improving the tax
status of each of
your assets.
1985
What worked:
 Relying on
Medicare and
Social Security for
your healthcare
needs.
Health Costs In Retirement
65 year old healthy couple’s total
healthcare costs in retirement: $394,954
55 year old healthy couple’s total
healthcare costs in retirement
(starting age 65): $463,849
55-year old couple who lives
TWO YEARS beyond average life
expectancy = additional $57,353
2015 Retirement Health Care Cost Data Report, HealthView Insights, January 2015
Cutting Into Your Social Security Benefit
Percent of Social Security Income
being used for medical expenses:
AGE 80
68%
AGE 87
89%
Assumptions: 66-year old couple with SSI primary insurance amount of $25,332. Future dollars based on 2% annual COLA
Increase. Data obtained from 2015 Retirement Health Care Cost Data Report, HealthView Insights, January 2015
The Cost of Long-Term Care
Average cost for assisted living
facility: $32,400 a year
Average cost for nursing home
care: $67,525 a year
Chance of a 70-year old couple
needing long-term care: 80%
https://www.genworth.com/corporate/about-genworth/industry-expertise/cost-of-care.html
http://longtermcare.gov/the-basics/who-needs-care/
2015
What works:
 Establishing
additional
resources for
long-term care
and medical
costs.
1985
What worked:
 Planning to live
15 to 20 years
in retirement
Percentage of 65-year olds who will live to…
90%
80%
70%
60%
50%
Male
40%
Female
30%
20%
10%
0%
80
85
90
Data used to create this chart was sourced from: American Academy of Actuaries “Lifetime Income:
Risks and Solutions,” Oct. 26, 2011. Based on 75% of Social Security Mortality in 2007.
95
Why It Matters
6.2 times your last
working salary in savings
8.6 times your last
working salary in savings
https://www.fidelity.com/viewpoints/retirement/8X-retirement-savings
2015
What works:
 Planning to live
20 to 30 years
in retirement
New Savings Rules
for 2015
 Have a strategy to grow your
funds AND protect them from
market fluctuations
 Improve the tax status of your
assets
 Establish additional funds to cover
the medical cost of aging
 Have a strategy to make your
funds last as long as you do
Your Four Biggest Risks
Market Risk
Tax Risk
Health Risk
Lifespan Risk
Are you concerned
about these risks?
Are you prepared to
handle them?
Accomplishing Your Goals
There are financial strategies that can:
 Allow you to participate in good markets
while protecting you for down markets
 Deliver additional funds for long-term
care from savings assets
 Completely eliminate the risk of outliving
your assets
 Improve the tax status of your funds
Helping Jim
Jim had at $50,000 CD but was
frustrated it was earning very little.
We created a strategy to help those funds:
- Grow, with meaningful rates of return
- Stay protected and secure
- Offer additional funds for long-term care
needs
- Remain liquid should he need to access
them
Helping Ann Marie
Anne Marie had a 401(k), but she
wasn’t sure how to make it last
throughout her retirement.
We created a strategy to help those
funds:
- Deliver guaranteed income for as
long as she lived
- Continue growing
- Potentially offer benefits for her
spouse
Helping Scott
Scott was very concerned with his tax
liability on his retirement savings.
We created a strategy to help those funds:
- Grow tax-free
- Diversify his tax liability
- Offer additional funds for long-term care
needs
This information is not intended to provide tax, legal or investment advice. Be sure to speak with qualified professionals
before making any decisions about your personal situation.
Complimentary
No-Obligation
Risk Review
 Analyze your current approach
 Identify areas of exposure or under
performance
 Recommend areas for improvement
Stonewood Financial
Solutions
(502) 588-7155
StonewoodFinancial.com
All information sources cited in this presentation are available upon request. This presentation is for informational purposes only. It is not
intended to provide legal, tax or investment advice. Be sure to consult a qualified professional about your individual situation. The presenter is
licensed to sell insurance. By setting up a meeting with this advisor, you may be offered information about life insurance products..