Forecasting Your Retirement - DMBA

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Forecasting Your Retirement

MISSION STATEMENTInspire action to achieve lifelong financialsecurity, empowering individuals to save,serve—and bless others’ lives.Participant name:Planner name:Planner contact info:

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CONTENTSDMBA FINANCIAL PLANNING TEAMRetirement can be an exciting time, butas you plan your transition, the myriad ofoptions and decisions can appear daunting.DMBA’s Certified Financial Planners haveprepared this booklet to help you throughthe process.If you would like individual coaching or apersonalized financial plan, you may consultwith a member of the team at any time. Youhave worked hard all your life, and we arehere to help you get ready to retire.800-777-3622, ext. 5627finplanning@dmba.com304CORE FINANCIAL PRINCIPLESREVIEW06FIND PURPOSE08SOURCE OF INCOME:Social Security10SOURCE OF INCOME:Master Retirement Plan (Pension)12SOURCE OF INCOME:Deseret 401(k) Plan16EXPENSE:Health Benefits in Retirement18INSURANCE PROTECTION20ESTATE PLANNING22RETIREMENT PITFALLS23APPENDIX

ACTION PLANCORE FINANCIAL PRINCIPLES REVIEWF Plan your spending.F Reduce your debt.1. FIND PURPOSEF Consider service opportunities at home or abroad.F Consider senior missionary service openings at SeniorMissionary.ChurchofJesusChrist.org.2. SOCIAL SECURITYF Create an account and view your Social Security estimates at www.ssa.gov.F Consider your health, family health history, financial position, and personal preference aboutwhen to begin receiving Social Security.F Three months before you wish to receive Social Security benefits, apply at www.ssa.gov.3. MASTER RETIREMENT PLAN (PENSION)F Obtain your retirement estimates at www.dmba.com using DMBA’s pension calculator.F Review and choose a retirement benefit payment option. (See page 10.)F Three months before retirement, complete the online Retirement Benefits Application atwww.dmba.com.4. DESERET 401(K) PLANF Verify you’re saving enough to be ready for retirement.F Review your current investment selections and update your choices if appropriate.F Review and choose a retirement benefit payment option.5. HEALTH BENEFITS IN RETIREMENTFFFFFactor in the monthly cost of Medicare part B premiums.If you are eligible, obtain estimates of your retiree medical plan premiums.Apply for Medicare benefits three months before retirement if age 65 or older.If you aren’t eligible for a retiree medical benefit, apply for needed medical insurance twomonths before retirement.6. INSURANCE PROTECTIONF Review your needs and available retiree coverage.F Estimate your life insurance needs at www.dmba.com using DMBA’s financial calculators.7. ESTATE PLANF Review and update your beneficiary designations at www.dmba.com.F Create or update a will/trust, healthcare directives, and power of attorney.8. FOLLOW-UP/REVIEWF For a comprehensive financial analysis, email finplanning@dmba.com to request the FinancialPlanning Questionnaire or visit our website at www.dmba.com.F Review steps to apply for retirement, Social Security, and Medicare on page 24.F For other questions and coaching, contact DMBA’s financial planners at 800-777-3622,ext. 5627 or finplanning@dmba.com, or visit our website at www.dmba.com.4

Core Financial Principles ReviewPLAN SPENDINGDID YOU KNOW?One study found that most Americans fail toaccount for the cost of keeping themselvesentertained. Given that retirees typically havemore free time, factoring in leisure expensesis crucial when mapping out your retirementbudget and goals.Planning your spending is a simple andfundamental principle that will continue tobe important as you prepare for retirement.People often become freer with theirspending later in their careers whentheir income is higher. As you begin tocontemplate retirement, it’s important to naildown how much you are spending now andhow much you plan to spend in retirement.Source: Maurie Backman, “10 Retirement Stats that Will Blow YouAway,” The Motley Fool, April 16, 2017REDUCE DEBTAs you do so, you may want to considersome of the things you plan to do duringretirement, such as:It is best to retire debt-free. If you are dealingwith debt, contact DMBA’s financial plannersfor information about how to build a debtkiller “snowball” plan. For additional guidanceon getting out of debt, see our Core FinancialPrinciples booklet at www.dmba.com. Charitable giving and service Senior missions Traveling Replacing vehicles Giving giftsTake time to determine your true currentexpenses and estimate your budget forretirement, including goals you want toaccomplish.This booklet covers steps you shouldtake to prepare for retirement. Forcoaching and guidance on basic moneymanagement, see our Core FinancialPrinciples booklet at www.dmba.comor contact DMBA’s Financial PlanningTeam for a copy.Core FinIt’s not5aboutancial Pthe dollars; itrinciples’s aboutthe change.

Find Purpose“There isn’t any level of service that isn’t guaranteed to make you happier.”—Arthur BrooksWHAT TO DO WHEN YOU RETIREDuring retirement, you finally have completecontrol over your own time. But while “everyday is Saturday” may sound appealing, youcould soon run out of things to do. It helpsto make plans before retirement about howyou’ll fill all that free time. Here are a fewsuggestions. Attend special events Create a bucket list Declutter and reorganize Enroll in a class Exercise Find a part-time job Get involved in civics Join a social organization Join a sports league Learn a new hobby Learn a new language Learn to play music Mentor or teach Move to a new place Participate in spiritual activities Play games with friends Read Remodel your home Spend time with family Start a business Travel Write your life’s story6

Sacramento, CA 3,500London, EnglandNew York South 3,650 3,800Seoul, KoreaBarcelona, SpainCancun, Meixco 2,369 3,000 2,543SingaporeCape Town, South AfricaSantiago, Chile 2,418 2,343 2,150Melbourne, Australia 3,950READY TO SERVE?Giving and service are essential parts of any financial plan. Retirement provides a uniqueopportunity to serve. Senior missions can be a big part of this service and retirees areoften surprised to learn how inexpensive these life-changing opportunities can be. Thesefigures illustrate 2019 total monthly spending estimates for a couple serving in a mission, aspublished in the Senior Missionary Opportunities Bulletin. These examples include most majorexpense categories such as housing, food, and transportation. (For more information, seeSeniorMissionary.ChurchofJesusChrist.org.)* All of these monthly estimates are complete costs for a couple, including health insurance7

SOURCE OF INCOME:Social Security“I advise you to go on living solely to enrage those who are paying your annuities. It isthe only pleasure I have left.”—VoltaireSOCIAL SECURITY STRATEGIESdeferring, you should consider your spouse’slife expectancy as well.Social Security benefits can begin as early asage 62 for most people. Depending on yourlife expectancy, it could make sense to deferbenefits until at least your full retirement age.PERSONALIZINGYOUR SOCIAL SECURITYSocial Security’s so-called “loopholes” wereeliminated in 2016 when congress cancelledthe “File and Suspend” and “RestrictedApplication” options. This significantlyreduced the number of strategies retireescan use to maximize their benefits, but it isstill important to understand which strategywill work best for your situation. DMBA’sCertified Financial Planners can coach youthrough the process, compare options,and help you understand whichstrategy may be right for you.The graph on the next page illustrates thedifference in lifetime benefits depending onwhen you begin. For each year you delaystarting Social Security beyond your fullretirement age, your benefit will increase by8% until age 70.SPOUSAL BENEFITSSocial Security pays a benefitto non-working spouses ontop of the retiree’s regularbenefit. This can equal asmuch as 50% of the retiree’sfull retirement age benefitif the spouse waits until fullretirement age to begin.What strategydo you plan touse?If the retiree has already begunbenefits, a non-working spousemay begin receiving benefits as earlyas age 62, but the benefit will bereduced to 32-35%.A surviving spouse will receive100% of the retiree’s full retirement agebenefit for life (or continue to receivehis or her own benefit, whichever ishigher). For this reason, when decidingbetween beginning benefits early or8

STRATEGIC PLANNINGSOCIAL SECURITY90 571,20090 690,0009085858580808075 265,2007570706565STARTAGE 6260 1,700MONTHLYYour benefit: Start at age 62 240,000 744,00075 186,00070STARTAGE 6760STARTAGE 706560 2,500 3,100MONTHLYMONTHLYSpouse’s benefit:Start at age 67Start at age 70at 62 at 67 at 67 at 70 at 709at 62

SOURCE OF INCOME:Master Retirement Plan*“The question isn’t at what age I want to retire. It’s at what income.”–George ForemanPAYMENT OPTIONSThe Master Retirement Plan hasseveral payment options to choosefrom when you retire. See theappendix for a complete list ofall payment options available. Tolearn more about the paymentoptions available to you personally,call DMBA Member Services orlog into www.dmba.com to usethe Pension Benefit Estimator. Ifyou have pension plans outsideof DMBA, be sure to make thenecessary arrangements for thoseplans as well.INCREASING VS. LEVELWHICH IS BEST?Once you’ve decided on which paymentoption suits your situation, you may choosefrom two general payment alternatives. Thelevel payment alternative provides a monthlypayment that remains the same, from monthto month and year to year.You will need to consider your personalcircumstances (including your health and ageat retirement, your spouse’s health and age,and your expected financial needs) to decidebetween the level and increasing paymentalternatives.The increasing payment alternative starts at alower monthly payment and then increases at4% annually each January. In the beginning,payments are about one-third less than thelevel payment alternative. It takes about 10years to see monthly increasing paymentsequivalent to the monthly level payments. Ittakes another eight years to “break even”—that is, to receive a payout equal to what youwould have received from the level paymentalternative over the same period. (See theillustration above.)You may want to keep in mind that retireestend to spend more earlier in retirementand that it takes 18 years of the increasingpayment alternative to break even with whatyou would receive from the level paymentalternative. However, if you plan to retireearly or if your spouse is much youngerthan you, you may want to consider theincreasing payment alternative. With longerlife expectancies, this alternative provides away to manage inflation over time.10

WHICH OPTIONWILL YOU CONSIDER?amount as the Life Benefit. But if you passaway within 10 years of retirement, paymentswill continue to your beneficiary for theremainder of the 10-year period.Married RetireesEARLY RETIREMENT REDUCTIONSIf you are married, consider the availableLife with Survivor Benefit payment options.For example, if you pass away first, theLife with 100% Survivor Benefit (10-yearCertain) payment option ensures full benefitpayments to your surviving spouse for life. Ifboth you and your spouse die within 10 yearsof retirement, payments will continue toyour beneficiary until the end of the 10-yearperiod.Though you may retire when you turn 55**,you must work until 65 to receive your fullMaster Retirement Plan benefit, unless youhave earned 30 years of service by age 62.To calculate your early retirement benefit,visit www.dmba.com and choose the MyRetirement drop-down menu. To see howmuch your benefits may be reduced if youdecide to retire before you turn 65, see thegraphic below.Single RetireesIf you are single, the Life with 10-year Certainpayment option provides close to the sameYour estimate:Age Age Age * The terms of the Master Retirement Plan legal document, your employer, and hire date/employment history determine your eligibility for this plan.** Eligible employees hired after March 2010 may not begin receiving monthly benefit payments before age 60.11

SOURCE OF INCOME:Deseret 401(k) Plan** The terms of the plan legal documents, your employer, and hire date/employment history determine your eligibility for this plan.RETIREMENT SAVINGSIN RETIREMENTand US-based stocks and bonds that adjustsautomatically to become more conservativeas you near retirement.Your Deseret 401(k) Plan account is designedfor you to use for life. As long as your balanceis over 5,000, you can keep your money inthe plan and you don’t need to roll overyour account balance when you retire.If you have investment accounts outside ofDMBA, or if you opted out of enrollmentin a LifePath fund, consider reviewing andadjusting those investments to a moreconservative portfolio as you near retirement.Eligible employees hired on or after April 1,2010 also receive an Employer DiscretionaryContribution (EDRC) to their 401(k) accounts.ACCESSING YOURRETIREMENT SAVINGSINVESTING IN RETIREMENTOnce you are ready to draw from yourDeseret 401(k) account, you may choosefrom the following options:While you will still need investment growth,as you approach retirement the focus foryour retirement savings should generallyshift from accumulation to preservation. Ifyour Deseret 401(k) Plan account is investedin a BlackRock LifePath index fund, you arealready invested in a diversified mix of global Lump sum payment Annual Payment Option Fixed monthly payments Flexible monthly payments Withdraw from your account as often asevery 90 daysFor help choosing and setting up yourpayment option, call DMBA MemberServices at 800-578-5600.REQUIRED MINIMUM DISTRIBUTIONMandatory withdrawals, known as RequiredMinimum Distributions (or RMDs) must bemade beginning at age 70½ or age 72,depending on your age as of December 31,2019. The mandatory amount is not largeand it can be sent to you on a monthly orannual basis. DMBA will notify you when thismust begin and will calculate the amount.12

You may be subject to a tax penalty if youdon’t begin to receive RMDs on time.won’t need the funds for years, it’s importantto use financial markets to your advantage.Once you have chosen the right investmentportfolio for your situation, stick to it.Creating an investment policy statement canhelp you do this. You can create this on yourown or with the help of a financial planner.INVESTMENT POLICY STATEMENTWhether you intend to tap into yourretirement savings right after you retire orTHE LIFECYCLELIFECYCLE OFOF AA BLACKROCKBLACKROCK LIFEPATHTHELIFEPATH lfwayHalfway(age45 to 50)(age 45 to 50)At the start of your careerAt the startof your(age25) career(age 25)99BB99%99%stocksstocks99DSONNDSOBBDSONNDSO95At retirementAt (ageretirement65)(age 65)88786754402065206020552050204520402035 Percentage of Stock in Each Fund1320302025RETIREMENT

KEEP CALM AND CARRY ONDon’t react to short-term volatility. Trying tooutguess or time the market usually leads tolower returns. Studies show that individualinvestors rarely manage to stay invested in thesame funds for more than four years. Over a20-year period, individual investors earnedless than 5% while the stock market averagedover 8%.* Know your goals and investaccording to your time horizon.* DALBAR’s Quantitative Analysis of Investor Behavior, www.dalbar.com10%8.19%8% 511,6326%4.67% 254,0064%2%0sell & switchinvestorstock market20-year return 1995-2015on a 100,000 investmentMY 401(k) ACCOUNT IS CURRENTLY INVESTED IN:I AM CONTRIBUTING:% ROTH14% BEFORE TAX

INCOME DURING RETIREMENTTake some time to figure out how much income you can expect to receive during yourretirement years:FIXED INCOME SOURCESEMPLOYEESPOUSESocial Security Master Retirement Plan Other Pension TOTAL FIXED INCOME VARIABLE INCOME SOURCESCURRENT VALUEESTIMATED MONTHLYDeseret 401(k) Plan Investment Accounts TOTAL VARIABLE ESTIMATE TOTAL MONTHLY ESTIMATED INCOME ALL SOURCES15

EXPENSE:Health Benefits in Retirement[EXAMPLE OF MONTHLY MEDICAL COSTS GRAPHIC]RETIREE HEALTH BENEFITSEXAMPLE OF HEALTH INSURANCE COSTS:Your employer may offer retiree medicalplans to eligible retirees who are 65 andolder and their family members. If you areeligible for retiree medical benefits, the plancurrently offered by participating employersis called Deseret Alliance. This plan payssecondary to Medicare. Premiums forDeseret Alliance (and plans for those whoare younger than 65) will vary dependingon how long you have worked, your age atretirement, and the ages of your dependents.The example below illustrates the 2019 costfor a retiree, hired before April 2010, with atleast 20 years of service, and both the retireeand spouse are 65 or older.YourportionEmployer portionEmployedYourportionPlease note, if you are eligible for a medicalplan through your employer, you do notneed to enroll in Medicare Part C or Part D.EmployerportionRetired*55 years old with 20 years of service16

IF YOU WORK PAST 65IF YOU RETIRE AT 65Enroll in Medicare Part ADO NOT enroll in Medicare Part BEnroll in Medicare Part AEnroll in Medicare Part BEnroll in Deseret AllianceTo enroll in Medicare, visit www.SocialSecurity.gov.COVERAGE EXAMPLEYour PremiumsPrimary coverage–MedicarePART A (Hospital Insurance). freePART B (Outpatient Coverage) 144.60 per person. 289.20Secondary coverage–Deseret AllianceTwo Party Premium. 262.90Senior Dental PlanTwo Party Premium. 74.10TOTAL MONTHLY 626.2017

Insurance Protection“It’s paradoxical that the idea of living a long life appeals to everyone, but the idea ofgetting old doesn’t appeal to anyone.”—Andy RooneyLIFE INSURANCELONG-TERM CARE INSURANCEWhile some life insurance products aredesigned for liquidity and other high-income,estate planning purposes, most families needlife insurance for two reasons: to replaceincome and pay off debt. If you have savedappropriately and are entering retirementwith no debt, your need for life insuranceshould be minimal.Major medical insurance policies do notcover long-term care, such as: Protracted skilled nursing care at home Assisted living facilities Skilled nursing homesIn some cases, Medicaid funds can be usedto cover care. But recipients must spenddown all their assets to qualify for coverageand the choice of facilities may be limited.Through DMBA, your employer providescontinued Retiree Group Term Life coverageof 12,000 for you as the retiree. If you have10 years of service, you and your spouse canapply for Retiree Supplemental Group TermLife coverage of up to 35,000, dependingon your hire date and age.Life InAcquiring long-term care insurance can helpprotect against this risk. Consider purchasinga comprehensive policy that provides anadequate daily benefit and covers a fullrange of basic and skilled services in yourown home, a nursing home, or an assistedliving facility.setssAcialnaFinsurance NeedstDebEarly CareerMid CareerYOUR CURRENT COVERAGE:RetirementRECOMMENDED COVERAGE:18

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Estate Planning“Anyone who has possessions of any kind has an estate. Wisdom tells us that withdeath, our financial responsibilities do not end—they just change. Preparing for thatchange is called estate planning.”—Steven J. DixonARE YOU PREPARED?Many people never prepare an estate plansimply because they don’t know what it is.This section demystifies the process with alistofof what’sincludedin an estateOnly simple4 out10 U.S.adultshaveplan. Using an estate-planning attorney is themost reliable method. For a do-it-yourselfapproach you can try online resources.BENEFICIARIESName the individual(s) who will inheritaccounts such as 401(k), IRA, and lifeinsurance.a will.Think about401(k):Life Insurance:Only 4 out of 10 U.S. ad

F Obtain your retirement estimates at www.dmba.com using DMBA’s pension calculator. F Review and choose a retirement benefit payment option. (See page 10.) F Three months before retirement, complete the online Retirement Benefits Application at www.dmba.com. 4. DESERET 401(K) PLAN F Verify you’re saving enough to be ready for retirement.

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Marion Fanny Harris b: Coimbatore, India d: 26 July 1946 m: 4 November 1891 Eleanor Maud Gurney b: 1871 d: 1916 David Sutherland Michell b: 22 July 1865 Cohinoor, Madras, India d: 14 May 1957 Kamloops, British Columbia, Canada Charlotte Griffiths Hunter b: 1857 d: 1946 m: 6 August 1917 Winnipeg, Canada Dorothy Mary Michell b: 1892 Cont. p. 10 Humphrey George Berkeley Michell b: 1 October 1894 .