Planning Up to and Through Retirement Presented By: William B. Galgan, IPPFA, Director/Treasurer

Typical Retirement Plan You have Planner and Non- Planners

Retirement Checklist - Timeline Retirement is a reward at the end of a productive working career 3 Years before retirement Contact your 457 representative to discuss the Pre-Retirement catch-up provision 1 Year before retirement If Applicable, Contact your Social Security Administration office and request a Social Security Earnings and Benefits Estimate Statement. Review statement for accuracy and notify the SSA of any errors. Obtain a Pension Estimate. 5 Months before retirement Consider consulting a tax advisor for recommendations on tax strategies. The SSA advises you to file an application for Social Security benefits 3 months before you wish benefits to begin.

Retirement Checklist - Timeline Retirement is a reward at the end of a productive working career 1 Month before retirement If you participate in a deferred compensation plan, call your Nationwide representative. 1. understanding of how to request distributions 2. obtain copies of necessary forms. When you retire Submit your distribution forms to Nationwide, as applicable. Distribution can take between 7-15 days. Decide if you wish to remain covered under the City’s medical, dental and/or life insurance plans, and if so, submit the required paperwork. When you reach age 65 – 67 depending on year of birth Call or visit your Social Security office to apply for Medicare during the 3 months preceding the month in which you or your spouse will become age 65 - 67.

No Longer Paying State Income Tax Pension Contribution Medicare Tax Union Dues

Now Paying Health Insurance Premiums 2% After Tax is retired between 55-60 $0.00 if age 60 Will be paying full Medicare Part B Medicare Supplement Premiums

Retirement Risks Inflation Poor Asset Allocation Not Enough Money Unexpected Medical Expenses Taxes When to Start Social Security

Inflation risk: Diminishes purchasing power Historical Impact of Inflation on Common Expenses* White Bread (1 lb.) Coffee Regular Gas (1 gal.) Home** 1987 $0.55 $2.58 $0.95 $127,933 2017 $1.37 $4.43 $2.17 $390,400 2047 $3.41 $7.61 $4.96 $1.2M Over the past decade, we have experienced very low inflation. We have had some “shocks” in there on such items as Gas. Remember when gas was $4.50 a gallon when oil hit $140 a barrel? We will certainly have times in the future that we will have inflation again. Now compare these prices with what they’d be in 2047… See often times we think in today’s terms…..but inflation requires that we think in tomorrow’s. * Average cost of all products through entire years of 1987, 2016, and Jan., Feb., Mar., of 2017. Source: U.S. Bureau of Labor Statistics, 2017 ** Average cost of homes throughout entire year of 1987, 2016, and Jan., Feb., Mar., of 2017. Source: U.S. Census, 2017

Healthcare Costs Post age 65 Retiree health care costs continue to rise. The estimate for retiree health care spending rises to an average of $280,000 per couple, excluding long-term care expenses. This is an increase of $15,000 from 2016. Health care continues to be one of the largest expenses in retirement.

Long Term Care (the forgotten piece) Long Term Care doesn’t mean nursing home care! Medicare doesn’t pay for chronic care Families aren’t prepared for this job (location, time consuming, exhausting,….) Where does the incremental money come from? ($6,000-15,000 monthly now)

The Default Plan !

How you save and How you get the money matters Goal - $30,000 to supplement pension & social security Pension $70,000 from qualified plan -20% taxes $56,000 - Net $15,000 from qualified plan 20% taxes $12,000 + $18,000 from Roth (tax free) Withdraw $33,000 rather than $40,000 Save $7000 annually for 30 years = $210,000

Savings Vehicles Qualified Options Non-Qualified Options Employer Plans – First Choice 457 Pre-Tax 457 Roth (After-Tax) Personal (non-employer) Options Roth IRA’s Traditional IRA’s Non-Qualified Options Traditional Brokerage Cash Value Life Insurance Annuities (buyer beware)

Retirement Strategy No Illinois tax on retirement plan distributions. Defer as much as possible You can immediately withdraw the funds upon retirement You save the 4.95% State of Illinois income tax

Mistakes – Transferring your 457(b) into an annuity Buyer Beware Never fund an IRA with an Annuity You already have one – it is your PENSION

Annuties Questions to Ask What are the fees? What is the surrender period and charges? What type of annuity is being proposed? Is there a participation or cap rate? (common with equity-index annuities) Is this suitable for me or is there a better way to meet my goals?

Annuities Disadvantages Buyer beware of costs No stepped-up basis for heirs with an annuity TRADITIONAL ANNUITIES: 1.25% cost, plus sub-account expenses Surrender charges – 7 to 15 years, taxable event – Big Fees to quit or withdrawal your money. You are tying up your funds for along time. Money is no longer available until age 59 1/2 without a 10% Excise Tax

Thank you