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Presented by:. Peter Dan Sullivan, CFP® Sullivan Financial Group 111 N Last Chance Gulch St, STE3-C Helena, MT 59601-4144 Securities and Investment Advisory Services offered through ING Financial Partners, Member SIPC

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  1. Presented by: Peter Dan Sullivan, CFP® Sullivan Financial Group 111 N Last Chance Gulch St, STE3-C Helena, MT 59601-4144 Securities and Investment Advisory Services offered through ING Financial Partners, Member SIPC Sullivan Financial Group is not subsidiary of nor controlled by ING Financial Partners

  2. Topics for today • 5 key challenges to prepare for in retirement • Achieving a successful retirement • Putting an income plan into practice

  3. Five challenges we can prepare for • Longevity • Inflation • Health-care costs • Public policy changes • Investment risks and volatility

  4. Longevity: Plan on spending25 to 30 years in retirement Your lifespan probability after reaching age 65 Living to age 83 Probability: 56% Living to age 89 Probability: 31% Living to age 94 Probability: 14% Age Source: National Center for Health Statistics, U.S. Life Tables, 2005. Most recent data available.

  5. Even low levels of inflation make a difference over time Amount needed to maintain purchasing power: • 30 years • $50,000 income $287,174 $162,169 $90,568 Inflation rate

  6. Health-care costs outpacing inflation and earnings • A couple age 65 retiring in 2013 needs over $200,000 in savings to fund healthcare needs in retirement • Fidelity Consulting Services, 2011 Source: Kaiser Family Foundation, April 2012.

  7. What about Social Security? $0 $$ Source: Social Security Administration 2012 Annual Report.

  8. Where are income taxrates headed? U.S. federal income tax rates, 1962–2013(%) Kennedytax cuts (%) Tax Reform Act of ’86 Fiscal cliff deal Bush/Clinton tax hikes Bushtax cuts Tax rate Bush tax cuts extended 1962 2013 This chart reflects the maximum federal income tax rate at each year-end.Source: Internal Revenue Service, 2012.

  9. Achieving a successful retirement • Diversify to manage volatility and achieve growth • Make sure you’re not withdrawing too much • Consider adding guaranteed income • Be smart about taxes • Address other potential risks

  10. Choose the rightwithdrawal rate How long would your money have lasted? Cash 10% Bonds 30% Stocks 60% Years 4%will last33years 3%will last50years 5%will last20years 6%will last16years 7%will last13years 8%will last12 years 9%will last11years 10%will last10 years Percentage of your portfolio’s original balance withdrawn each year This example assumes a 90% probability rate. These hypothetical illustrations are based on rolling historical time period analysis and do not account for the effect of taxes, nor do they represent the performance of any Putnam fund or product, which will fluctuate. These illustrations use the historical rolling periods from 1926 to 2012 of stocks (as represented by an S&P 500 composite), bonds (as represented by a 20-year long-term government bond (50%) and a 20-year corporate bond (50%)), and cash (as represented by U.S. 30-day T-bills) to determine how long a portfolio would have lasted given various withdrawal rates. A one-year rolling average is used to calculate performance of the 20-year bonds. Past performance is not a guarantee of future results. The S&P 500 Index is an unmanaged index of common stock performance. You cannot invest directly in an index.

  11. Address longevity risk Historical success of three asset mixes(assumes 5% withdrawal rate, adjusted for inflation annually) 89% 27% 3% 96% 76% 54% 96% 79% 68% 0–59% probability 60%–79% probability 80%–100% probability These illustrations are based on a rolling historical time period analysis and do not account for the effect of taxes, nor do they represent the performance of any Putnam fund or product, which will fluctuate. These illustrations use the historical returns from 1926 to 2012 of stocks (as represented by an S&P 500 composite), bonds (as represented by a 20-year long-term government bond (50%) and a 20-year corporate bond (50%)), and cash (U.S. 30-day T-bills) to determine how long a portfolio would have lasted given various withdrawal rates. A one-year rolling average is used to calculate performance of the 20-year bonds. Past performance is not a guarantee of future results. The S&P 500 Index is an unmanaged index of common stock performance. You cannot invest directly in an index.

  12. When you retire can make a big difference Sequence of returns risk refers to adverse effect negative investment returns in the early stages of retirement can have on a nest egg • Assumptions • $1 million nest egg • 5% withdrawn annually and increased each year to keep up with inflation • Invested in a portfolio of 60% stocks, 30% bonds, and 10% cash • Results over a 10-year time frame $1,861,592 $1,731,989 $1M $472,238

  13. Consider diversifying more broadly in retirement U.S. large-cap stocks U.S. high-yield bonds U.S. Treasury bills Hedge funds Floating rate bank loans Commodities Developed country international stocks Global investment grade bonds Real estate investment trusts U.S. investment grade bonds U.S. small-cap stocks Emerging-market stocks Inflation-protected securities U.S. growth and value stocks Emerging-market bonds Traditional asset classes are defined as those included in traditional balanced portfolios, such as stocks, bonds, and cash, and that have been widely owned by individual investors since the post-war emergence of modern portfolio theory. Modern asset classes are specialized investments that were created or have become more accessible since the advent of broader market participation by individual investors due to tax-advantaged retirement saving

  14. Example Balanced portfolio – 50% stocks, 40% bonds, 10% cash 5% withdrawn annually Guaranteed income based on current immediate annuity rates Consider adding guaranteed income Probability of portfolio survival over 30 years 93% 69% No guaranteed income 25% guaranteed income This example is based on rolling historical time period analysis and does not account for the effect of taxes, nor does it represent the performance of any Putnam fund or product, which will fluctuate. Assumes historical rolling periods from 1926 to 2012 of stocks (as represented by an S&P 500 composite), bonds (as represented by a 20-year long-term government bond (50%) and a 20-year corporate bond (50%)), and cash (as represented by U.S. 30-day T-bills) to determine how long a portfolio would have lasted given various withdrawal rates. A one-year rolling average is used to calculate performance of the 20-year bonds. Guaranteed income is based on a single premium, immediate annuity for a 65-year-old male assuming single life expectancy. Past performance is not a guarantee of future results. The S&P 500 Index is an unmanaged index of common stock performance. You cannot invest directly in an index.

  15. Pay attention to taxes

  16. Use a Roth strategy to control your tax bill • Source of tax-free income in retirement • Access to tax-free source of income provides more options on where to draw income from • No mandatory withdrawals at age 70½ • Having a portion of retirement savings in a Roth IRA can provide a hedge against the threat of rising taxes in retirement

  17. Preserve your wealth in retirement through tax efficient withdrawals

  18. Address other specific risks

  19. Putting an income plan into practice • Expense approach:Matching income sources with expenses • Time-frame approach:Considering a bucket strategy

  20. Match potential sources of income to expenses in retirement

  21. Consider a bucket approach Short-term income (0–2 years) Mid-term income (2–10 years) Long-term income (10+ years) Meet immediate cash-flow needs, emergency fund, etc. Mix of growth and income, replenish short-term bucket, guard against market volatility Inflation hedge, address longevity risk • Cash • CDs/money market • Short-term bonds • Immediate annuities • Social Security/pension income • Wages • Bonds • Deferred annuities • Absolute return funds • Asset allocation funds,balanced funds • Growth stocks/funds • Real estate • Commodities • Longevity insurance

  22. Closing thoughts • The retirement landscape will continue to evolve • It’s critical for investors to prepare for certain(and uncertain!) risks • A thoughtful income strategy can help you address these challenges and attain the lifestyle in retirement you desire • Meet with your financial advisor to assess your personal situation

  23. Additional resources • On the web • AARP, www.aarp.org • Social Security Administration, www.ssa.gov • American Savings Education Council, www.asec.org • ElderWeb, www.elderweb.com • Medicare, www.medicare.gov • National Association of Home Care Providers, www.nahc.org Books • Longevity Revolution: As Boomers Become Elders, Theodore Roszak • AgeQuake, Paul Wallace • Age Power: How the 21st CenturyWill Be Ruled by the New Old,Ken Dychtwald, Ph.D. • We're Not in Kansas Anymore: Strategies for Retiring Rich in a Totally Changed World,Walter Updegrave • How Not to Die Broke at 102,Adriane Berg

  24. A BALANCED APPROACH A WORLD OF INVESTING A COMMITMENT TO EXCELLENCE EO013 280390 3/13 | 25

  25. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or product, call your financial representative or call Putnam at 1-800-225-1581. Please read the prospectus carefully before investing. Putnam Retail Management putnam.com

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