Achieving Financial Wellness

Achieving Financial Wellness
Wespath Benefits & Investments

Workshop objectives Know how to assess your current financial position
Learn how to set goals and develop a plan for achieving them Understand how to control your spending and manage your debt Know how to maximize your retirement income sources Review a process for investing your retirement assets Learn to use the tools and resources available to you Know which steps to take next

Tools and resources Wespath Benefits and Investments Benefits Access
Benefits Access Wespath Benefits and Investments Call Center

EY tools and resources EY Financial Planner Line® (EYFPL)
Call Monday – Friday; 9 AM – 8 PM ET EY Financial Planning Center® (EYFPC) wespath.eyfpc.com Articles, calculators, tools and resources

□ Personal action plan Action Step When Done Action Step
The value in this or any other financial seminar really comes from how you actually use the information provided and the knowledge gained. We hope to make this goal of “Taking Action” easy for you by use of a Personal Action Plan. Elements of a Personal Action Plan: A specific series of steps A time frame in which to achieve each of them Throughout this session, we’ll be highlighting specific action steps for you to consider for your own Personal Action Plan. Better chance of following through if you write it down. Point out the Personal Action Plan form they have in their handouts and strongly encourage them to use it to develop their own course of action. Throughout the seminar there will be suggested action items popping up to trigger your list; you will likely think of others important to you. The key is to develop a list that will make it easy for you to follow-up after the seminar. Action Step See Appendix D to create your own personal action plan

Getting started

We all have a “life equation”
Retirement date Assets Longevity Savings Legacy Spending Other goals Retirement spending Today Tomorrow

Do you know what your “life equation” looks like?
Retirement date Assets Longevity Saving Legacy Retirement Income Spending Kid’s College Retirement spending Today Tomorrow

Financial planning is about trade-offs and choices
Are you over emphasizing today’s enjoyments at the expense of tomorrow’s needs?

What would it take to balance your “life equation”?
Retirement date Today’s account balances Longevity How much you are saving Legacy How much you are spending Other goals Retirement spending Today Tomorrow

How does Wespath help you achieve financial well-being?
Wespath Benefits Retirement Pension and investments Health & Insurance Medical* Life & disability Tools and Resources EY financial planning Employee assistance program Wellness programs* Health coaching* Activity program* Benefits Access LifeStage programs *Conference specific

EY Financial Planning Center®
Action Step Visit wespath.eyfpc.com and complete the Financial Wellness Assessment

Financial Wellness Score
Financial Wellness Action Items

What is financial wellness?
Financial wellness is a term used to describe your overall financial health, specifically, how you manage your day-to-day finances and your financial plans for the future Financial concerns you may have: Cash Flow Credit Cards and Debt Home Purchase Investing Medical Costs Retirement Planning Paying for Education Student Loans Many more… Action Step Call the EYFPL for assistance with improving your financial well-being

Financial planning overview
Where are you today? Net Worth Statement, Cash Flow Statement Where do you want to be? How do you get there? 3

Net Worth = Assets - Debts
What is your net worth? Net Worth = Assets - Debts Assets Debts Personal Housing Retirement Auto Investments Consumer Action Step Visit the EYFPC website and use the Net Worth calculator and/or call the EYFPL for a net worth analysis

Cash Flow = Income - Expenses Discretionary Expenses
What is your cash flow? Cash Flow = Income - Expenses Income Necessary Expenses Discretionary Expenses Personal Housing Entertainment Retirement Food Vacation Investments Clothing Hobbies Action Steps Visit the EYFPC and use the Home Budget calculator and/or call the EYFPL for a Cash Flow analysis

Where are you today? Where do you want to be? Goals How do you get there? 3 3

What are your financial goals?
Home Purchase Education Retirement Other

S pecific M easurable A ctionable R ealistic T ime-bound
Setting S.M.A.R.T. goals S pecific M easurable Action Steps Complete the financial goals worksheet in Appendix B to identify and prioritize your goals A ctionable R ealistic T ime-bound

Setting S.M.A.R.T. goals - Examples
State the Goal – Be Specific Start date End date How much? How many years? Inflation? One Time Goal: An Example TODAY 5 YEARS PURCHASE $25,000 $29,000 Assumptions: 7% return 3% inflation $45,000 current income 80% replacement ratio Multi-Year Goal: An Example $36,000 $92,700 TODAY 32 YEARS END DATE RETIREMENT 28 YEARS Approximate need for retirement: $1,625,000

Where are you today? Where do you want to be? How do you get there? Make a financial plan and stick to it 3 3 3

Managing spending and debt

The money management process
Step 1: Evaluate current spending Step 2: Deal with shortfalls and debt Step 3: Create a spending plan Step 4: Review your progress

Who is spending? How are you spending? How much are you spending? How do you keep track? Step 1: Evaluate current spending

Who are the “savers” and the “spenders”?
Who is spending? Who are the “savers” and the “spenders”? Spouse Kids Parents Siblings You

The $5 problem $5 per day 30 days per month 30 year career 7% assumed growth rate = $182,997

How are you spending? Are your purchases planned or spontaneous?
When do you save for purchases and when do you borrow? When do you use cash/debit vs. credit cards? How often do you visit the ATM?

How much are you spending?
Checkbook / passbook Cash receipts Credit card statements Money management software Electronic organizer Record all expenditures – “The Notebook Method” Account for your total spending

Step 1: Evaluate current spending What are the consequences of debt? What type of debt? How does debt impact your credit scores? What is your ability to manage debt? How can you increase income? Step 2: Deal with shortfalls and debt

Consequences of debt Fees Interest charges
Negative credit consequences Stress Living paycheck to paycheck

How much does it really cost?
How much will that 4K Ultra HDTV cost you? $1,500 $60/month 18% 32 Months $1,920 Credit Card Rate Total Paid Payoff Time

Types of debt Tax Deductible Non-Tax Deductible
Student Loan Mortgage Investment Consumer Convert to tax-deductible debt Convert to lower rate debt

Which debt should be paid off first?
Pay down lowest balance first Feeling of accomplishment Psychological approach Pay high interest rate debt first Lowers overall interest paid Financial approach Pay off the debt with the highest monthly payment Improves your cash flow Cash flow approach

Step 1: Evaluate current spending Step 2: Deal with shortfalls and debt S.H.R.E.W.D. spending Develop a budget Step 3: Create a spending plan

hift S alt H estructure R xchange E ait W ecrease D
S.H.R.E.W.D. spending hift S alt H estructure R xchange E ait W ecrease D

Tax refund - Is it a good thing?
John and Jane Smith received a tax refund of $3,000 last year, they thanked their accountant and went home Pros Cons Didn’t owe money to the IRS Interest-free loan to the IRS Possible vehicle for “forced savings” Could have been used to pay down debt and save on debt interest costs Can allow for a “luxury purchase” The purchasing power of the $3,000 has been affected by inflation Action Step Call the EYFPL to analyze your W-4 withholding election

Emergency fund 3 to 6+ months of necessary expenses Accessible account
Checking/Savings Liquid, stable investment Cash, money market Help prevent borrowing in case of emergency

Prioritize savings and values
Gross paycheck Deductions (before-tax, after-tax, taxes) Net paycheck Necessary expenses Discretionary expenses Savings and Values

Prioritize savings and values
Gross paycheck Deductions (before-tax, after-tax, taxes) Net paycheck Savings and Values Necessary expenses Discretionary expenses

Tips for your spending plan
Pay yourself first Go into debt only as required (e.g., housing, education, car) Pay fixed monthly expenses automatically with electronic fund transfers Establish an emergency fund Use reserve checking/savings account for infrequent expenses Use cash or debit card instead of credit cards Set spending limits on discretionary expenses

Step 1: Evaluate current spending Step 2: Deal with shortfalls and debt Step 3: Create a spending plan Review monthly and annually Have financial goals stayed the same? Are you meeting your spending plan? Has inflation affected your spending? Has your tax situation changed? Step 4: Review your progress

FICO® Credit Risk Score
Scores range from to 850 Higher the score, the lower the risk to creditors 5 categories of information evaluated Types of credit in use (10%) New credit (10%) Length of credit history (15%) Amount owed (30%) Payment history (35%) Action Step Visit annualcreditreport.com to receive your free credit reports each year and identify a source to access your credit scores for free

Retirement planning

What are your retirement goals?
Home Purchase GrandkidsEducation Travel Other

The retirement planning process
When will you retire? Where will you live? What will you do in retirement? Step 1: What are your goals? Step 2: What will you need? Step 3: What will you have? Step 4: Is there a gap? Step 5: What should you do? Step 6: How can you stay on track?

Step 1: What are your goals? Step 2: What will you need? Step 3: What will you have? Step 4: Is there a gap? Step 5: What should you do? Step 6: How can you stay on track? How much will you spend each year? Do you anticipate any extraordinary expenses? How long will you live? What about inflation?

How long are you expected to live?
Average Life Expectancy Current Age Source: U.S. Department of Health and Human Services, National Vital Statistics Reports, Vol.67, Number 7, Dated November 13, 2018 Action Step Visit livingto100.com to estimate your life expectancy

Step 1: What are your goals? Step 2: What will you need? Step 3: What will you have? Step 4: Is there a gap? Step 5: What should you do? Step 6: How can you stay on track? What are your retirement income sources?

What are your retirement income sources?
Wespath Retirement Benefits Personal Resources Social Security

Employer benefits

How do you benefit from the Wespath Retirement Plans? – Clergy
Feature Overview Plan Types DB and DC components Contributions 100% church funded Payment Options CRSP DB: Monthly benefit CRSP DC: Lump sum or cash installments MPP: 65% of balance must be annuitized Pre ‘82: Monthly benefit Vesting 100% immediate Action Step Use Benefits Access to obtain a projection of your retirement benefits

How do you benefit from the Wespath Retirement Plans? – Clergy
When you can collect Payment Options CRSP DB Normal retirement age – 65 or 40 YOS Early retirement – 62 or 30 YOS Lifetime benefit, with survivor options (100%, 85%, 70%, 5 or 10 year certain) CRSP DC Normal retirement age – 65 or 40 YOS Lump-sum or partial lump sum, periodic cash installments, LifeStage Retirement Income, roll over MPP Voluntary retirement – 20 YOS, receive benefits at 62 65% of balance converted to lifetime annuity at current payout rate, 35% lump-sum can be rolled over to UMPIP Pre ‘82 Monthly benefit

How do you Benefit from the UMPIP? Clergy
Feature Overview Matching Contribution Incentive to contribute Pre-Tax Savings Reduces current Federal & SECA taxes Roth Savings Tax-free qualified distributions Tax-Deferred Compounding Savings grow faster Investment Control/Responsibility LifeStage Investment Management or Self-directed Payment Options LifeStage Retirement Income, cash installments, partial distribution, lump sum or rollover Payroll Deduction Automatic savings Action Step Contribute at least 1% to the UMPIP to receive 1% in the CRSP DC

UMPIP 2019 maximum contributions
401(k) 403(b) Maximum Combined Regular Pre-Tax plus Roth Contributions $19,000 Maximum Combined Age 50+ Pre-Tax plus Roth Catch-Up Contributions $6,000 Special Pre-Tax Plus Roth Contributions for 15+ Years Participants N/A Up to $3,000 Maximum Combined Contributions Contributions of all types (pre-tax, Roth and after-tax, but excluding catch-up) and from all sources (employee and employer) limited to lesser of $56,000 or 100% of compensation Action Step Contact the Wespath Call Center to determine if you are eligible to make special 15+ year contributions

Tips to maximize the UMPIP Clergy
Contribute at least 1% to the UMPIP to receive matching 1% in the CRSP DC Don’t miss out on employer money Only if you can maintain/increase your contributions Switch to Roth contributions $19,000; $25,000 if age 50+ in 2019 Contribute the maximum Inflation is a much greater risk than volatility when investing for the long-term Use an appropriate asset allocation Action Step Visit benefitsaccess.org to change your investment elections

Personal resources

Personal resources IRAs Taxable accounts
Previous employer’s retirement plans Spouse/partner’s retirement assets and pension Equity in personal residence

Individual Retirement Accounts (IRAs)
$6,000 annual contribution; $7,000 for individuals age 50 or older in 2019 (with catch-up) Spousal IRA available for non-working spouse Deductibility of contribution depends on income Traditional IRAs Contribution not deductible Withdrawals may be tax-free Availability may be restricted depending on your income Roth IRAs Note: Maximum annual contribution limits apply to a combination of both types of IRAs

IRAs: Eligibility and contributions
Traditional IRA Roth IRA Ability to Contribute Must have earned income (non-working spouse is eligible to contribute) Must have earned income (non-working spouse is eligible to contribute) 2019 AGI Phase Out Single & HOH: $122,000 - $137,000 MFJ: $193,000 - $203,000 Maximum Contributions $6,000 $1,000 catch-up for those age 50+ Contribution Deductibility 2019 AGI Phase Out – You Single & HOH: $64,000 - $74,000 MFJ: $103,000 - $123,000 2019 AGI Phase Out – Spouse Not deductible Taxation of Distributions Ordinary income on before-tax contributions and earnings 10% penalty may apply if under age 59 ½ Tax-free qualified distributions Non-qualified distributions may be subject to tax and/or penalty

Social Security

How much does Social Security currently provide?
Maximum monthly 2019 benefit at FRA* = $2,861 Average monthly 2019 benefit = $1,461 * Full Retirement Age

When You Can Collect Full Benefits
Social Security When You Can Collect Full Benefits Born Age For Full Benefits Reduced Benefit At Age 62 Before 1938 65 80% 66 75% 1960 and Later 67 70% Note: For years missing, add two-month increments to reach your age for full benefits

Delayed retirement credit (DRC)
8% annual DRC (for those born 1943 and later) Benefit must commence no later than age 70 Age 66 – FRA $1,000 / month Age 70 $1,320 / month

Social Security spousal benefits
$500: Spousal benefit based on 50% of Dan’s $1,000 Social Security benefit $400: Kathy’s Social Security benefit based on her own work history Kathy receives the greater of the two

Social Security spousal survivor benefits
One time lump sum of $255 Reduced monthly payments based on Worker’s benefit begin as early as when survivor reaches 60 Married at least 9 months prior to death Divorced spouse qualifies if married for 10 years and unmarried

Social Security 2019 earnings limitation
Under Full Retirement Age $17,640 – Reduced by $1 for every $2 earned above limitation In Year Reach Full Retirement Age $46,920 ($3,910 per month) – Reduced $1 for every $3 earned After Full Retirement Age No Earnings Limitation

Federal taxation of Social Security benefits
If “Modified” Adjusted Gross Income is: Amount of Social Security income subject to tax: Single Married < $25,000 < $32,000 0% $25,000 - $34,000 $32,000 - $44,000 Up to 50% > $34,000 > $44,000 Up to 85% Modified Adjusted Gross Income includes: Preliminary adjusted gross income, tax exempt income, and half of Social Security benefits

Social Security Action Step
Visit ssa.gov/benefits/retirement/estimator.html to project your benefits

Step 1: What are your goals? Step 2: What will you need? Step 3: What will you have? Step 4: Is there a gap? Step 5: What should you do? Step 6: How can you stay on track? How do your goals and income sources compare?

Annual Retirement Readiness Statement

Run a retirement report
Action Step Visit the EYFPC  Evaluate  Calculators  Retirement Planning and/or call the EYFPL for a retirement funding analysis

Step 1: What are your goals? Step 2: What will you need? Step 3: What will you have? Step 4: Is there a gap? Step 5: What should you do? Step 6: How can you stay on track? Save more Change investment mix Spend less in retirement Retire later Combination of above Other

Step 1: What are your goals? Step 2: What will you need? Step 3: What will you have? Step 4: Is there a gap? Step 5: What should you do? Step 6: How can you stay on track? Implement an appropriate asset allocation Develop a plan for the distribution of your retirement assets Monitor your plan annually or when changes occur

Investment planning

Cash & Equivalents, Fixed Income, Equities, Hard Assets
Investment strategy Conservation Accumulation Distribution Cash & Equivalents, Fixed Income, Equities, Hard Assets

Investor profile Time Horizon Risk Tolerance (Personality)
Action Step Determine your investor profile by visiting the EYFPC  Evaluate  Asset Allocation Target Return

Historical returns Stocks, bonds, bills and inflation: 1926-2018
Past performance is no guarantee of future results. Hypothetical value of $1 invested at the beginning of Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © Morningstar. All Rights Reserved.

UMPIP investment options
Asset Class Fund Name Multi Asset Class Multiple Asset Fund Fixed Income (Bonds) Stable Value Fund Inflation Protection Fund Fixed Income Fund Extended Term Fixed Income Fund Equities (Stock) – All Cap U.S. U.S. Equity Fund Equity (Stock) – Foreign International Equity Fund Social Values Choice Suite of Funds U.S. Treasury Inflation Protection Fund Social Values Choice Bond Fund Social Values Choice Equity Fund

LifeStage Investment Management
Automatic rebalancing and reallocation Provides customized investment fund allocation using the Wespath investment options Ability to opt in and out for optional plans Mandatory for Ministerial Pension Plan, optional for other plans Available to active and inactive members No additional cost to you* Customized investment mix developed based on age, risk tolerance, eligibility for Social Security Benefits and Expected Benefit Commencement Date A Personal Investment Profile can be developed Action Step Visit wespath.org to learn more and/or sign up for LifeStage *Costs for LifeStage Investment Management are included in Wespath’s operating expenses that are paid for by the funds

Managing investment risk
Types of risk How are they managed? Market risk Holding period Business risk Diversification Inflation risk Asset allocation

What is asset allocation?
Action Step Receive a custom asset allocation by visiting the EYFPC → Evaluate → Asset Allocation An investment strategy Considers the percentage of funds to be invested in stocks vs. bonds vs. cash Helps manage risk and maximize return Your most important investment decision Mid/Small Cap US Equity __% Foreign Equity __% Large Cap US Equity __% Fixed Income __%

Why is asset allocation important? Asset-class winners and losers
$100 $339 $217 Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. The diversified portfolio is equally weighted between small stocks, large stocks, long-term government bonds, Treasury bills, and international stocks (20% each). © Morningstar. All Rights Reserved.

Investment fees and expenses
Expenses on a $10,000 investment that earns 7% per year: Expenses paid: If expenses are 0.5% per year If expenses are 1.4% (average retail funds) After 5 years $325 $894 After 10 years $901 $2,428 After 20 years $3,461 $8,961 After 30 years $9,979 $24,847

Monitoring your investment mix
A Rebalancing Example: Bonds Stocks 90% Stocks 10% Bonds Investment mix after one year 30% FI Investment mix rebalanced 70% Stocks 30% Bonds 70% Stocks 30% Bonds Current investment mix Action Step Rebalance your portfolio at least annually

EY tools and resources EY Financial Planner Line® (EYFPL)
Call Monday – Friday; 9 AM – 8 PM ET EY Financial Planning Center® (EYFPC) wespath.eyfpc.com Articles, calculators, tools and resources EY webinars Sign-up on the EYFPC to attend live sessions View replays on the EYFPC EY Social Media Facebook: Twitter: Search

What can the EY Financial Planner Line® do for you?
Provide you with a net worth and cash flow analysis Help you develop a budget and a plan to pay down your debt Provide you with a retirement funding analysis Help you develop a plan to get on track for your goals Stay in contact to monitor and update your plan at least annually

EY Financial Planning Center® wespath.eyfpc.com

What 3 actions will you commit to taking following this workshop?
Visit the EYFPC for a net worth and cash flow analysis B Visit annualcreditreport.com to obtain and review your credit reports C Discuss and prioritize life goals, including retirement, with your family D Take the Financial Wellness Assessment on the EYFPC E Call the EYFPL for a retirement funding analysis F Implement an appropriate retirement savings and investment strategy

Post-workshop evaluation
Action Step Visit wespath.eyfpc.com to complete the workshop evaluation

Questions?

Achieving Financial Wellness

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