1. Longevity Planning: Making Your Money Last
Rev. John D. Peterson, CFP® CASL®

2. Threats to a Secure Retirement
Not understanding your life expectancy
Not taking inflation into account
Not understanding your pension options
Not understanding your social security options
Poor investment practices
Poor tax planning
Poor long term care planning
Trying to go it alone

3. Life Expectancy
The probability of living to various ages for smokers and non-smokers.
Probability
John (65) Lives to Age
Suzy (65) Lives to Age
Either Lives to Age
Chance you will live
to age shown
Non-Smoker
Smoker
50% 87 80 89 82 92 85
40% 91 84 94
30% 93 86 96 88
20% 98 90
10% 97 99
100
All calculations based on 2012 IAM Basic Tables.
Social Security Life Expectancy: John 82.75, Suzy 85.32

4. Inflation Period Inflation 1926-2015 2.90% Last 20 years 2.19%
1.86%
’70s
7.36%
’80s
5.10%
’90s
2.93%
’00s
2.52%
Source: Bureau of Labor Statistics’ Consumer Price Index, courtesy of Global Financial Data.
* The historical rates of inflation provided are not an indication of future rates of inflation.

5. What Is Inflation Risk?
The potential erosion in the purchasing power of a portfolio in retirement
Wages
CPI
Healthcare

6. Do I Have Enough to Retire?

8. Establish an Income Baseline
John and Suzanne Wesley
John’s Social Security Benefits $1,547
Suzanne’s Social Security Benefits $1,230
John’s Pre-82 $1,287
John’s MPP $2,048
John’s CRSP/ DB $680
Subtotal (A) $6,792 x 12 = $81,504
Other Investments $10,000
CRSP/DC $85,538
UMPIP with 35% Rollout $153,920
Subtotal (B) $249,458 X .03% = $7,484
Subtotal (A) $81,504
Subtotal (B) $7,484
Total Annual Income $88,988

9. Establish a Survivor Income Baseline
John and Suzanne Wesley
John’s Social Security Benefits $0
Suzanne’s Social Security Spousal Benefit $1,547
John’s Pre-82 $901
John’s MPP $1,434
John’s CRSP/ DB $476
Subtotal (A) $4,358 x 12 = $52,296
Other Investments  $10,000
CRSP/DC $85,538
UMPIP with 35% Rollout $153,920
Subtotal (B) $249,458 X .03% = $7,484
Subtotal (A) $52,296
Subtotal (B) $7,484
Total Annual Income $59,780
(Housing Exclusion Savings)

10. Social Security Options
Early retirement — reduced benefit, earned income limitation
Full retirement — no earned income limitation
Delayed retirement — 8 percent credit per year

11. Investment Risks in Retirement
Sequence risk — early retirement
Inflation risk
Longevity risk

12. What is Sequence Risk?
The risk of experiencing negative returns during retirement, especially during the beginning of retirement

13. When Things Start Poorly
Normal % Loss First Year 4%
4.07%
22.30% 5%
16.44%
61.30% 6%
39.01%
89.10% 7%
65.78%
97.90%
Probability of failure 60/40 portfolio and a 30-year distribution period

14. Acceptable Success Rates?
“Risk” is more than just the probability of a portfolio succeeding or failing.
What good is having a high probability of success if a retiree can’t sleep at night because they are worried about their portfolio?

15. What Is Longevity Risk?
The risk of outliving your resources — this is one of the most common fears among retirees.
Life expectancies are increasing.

16. Mitigating Inflation/Longevity Risk
Defined benefit plans allow for longevity risk pooling.
Annuities
Single premium immediate annuity
Annuity with a guaranteed minimum withdrawal benefit
Add inflation riders

17. Allianz Survey
Nearly 54 percent of Americans aged have expressed distaste for the word “annuity.”
This is despite the fact 80 percent surveyed preferred a product with 4 percent return and a guarantee against losing value over a product with 8 percent return and subject to market risk.
What it sold as versus what it does.

18. Long-term Care Facts
At least 70 percent of people 65 and older will require long-term care services at some point.
More than 40 percent will need care in a nursing home.
Source: U.S. Department of Health and
Human Services, September 2008

19. What Is Your Plan?
If you were to become sick or injured tomorrow and needed care for an extended period of time, who would provide your care?
How would you pay for that care?
Which assets would you liquidate first?

20. Financial Planning and Clergy Tax Resources
Ernst & Young
Florida Conference Office of Financial Services
GCFA tax packet (
Information on housing allowances and other clergy tax issues
IRS Publication 517
Social Security and other information for members of clergy and religious workers
Your own tax advisor

21. “The man who achieves makes many mistakes,
but he never makes the biggest mistake
of all — doing nothing.”
— Benjamin Franklin