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Retirement Redefined:Income Planning for the Modern Retiree

Challenges and choices facing pre-retiree baby boomers

For participants.

2

• Modern retiree

• Critical factors

• Five key risks

• Retirement income planning

Retirement Income Planning Agenda

3

You Are Not Alone

1. Based on births (1946–1964), U.S. Department of Commerce, Bureau of Census.

2. Fidelity Advisor 2013 Survey of Investors at Retirement, July 2013. Conducted by Research Now on behalf of Fidelity Investments, this survey included 1,886

investors between the ages of 50 and 75 with investable assets of $100,000 or more. Fidelity Investments was not identified as the survey’s sponsor.

81% of pre-retirees consider it “important”

or “very important”

that they have a retirement

income plan2

78 million baby

boomers

In 2011, the first of

77% of pre-retirees have no retirement

income plan2

turned 651

81% 77%

Many issues face members of the largest generation in American history as they contemplate retirement.

As a result, most have put off planning.

MODERN RETIREE

4

A New Retirement Scenario

Traditional Retiree

Has a pension plan and

health care coverage

Self-funded personal assets

to cover lifetime income and

health care

Modern Retiree

Retirement Income Planning

MODERN RETIREE

5

Retirement Is Changing

Hypothetical examples.

Modern Retiree

Traditional Retiree

• Twice married

• Three grown children

and four grandchildren

from first marriage

• Two teenagers from

second marriage

MORE COMPLEX "SANDWICH GENERATION"

RELATIVELY UNCOMPLICATED

• Married 1973

• Two children

• Retired 2010

• Company pension

• Empty-nester

• No mortgage

• No college payments

• Facing college bills

• SEP-IRA

• Not sure when he will

retire

• Aging parents

• Mortgage

Born 1950

Born 1950

MODERN RETIREE

6

1 2 3 4

Planning Your RetirementCRITICAL FACTORS

When Where How What

Earlier retirement

lowers lifetime

Social Security

benefit, increasing

investment

income need.

Cost of living,

health and long-

term care,

and taxes vary

nationwide.

Income needs

impacted by

working part-time,

staying active,

travel plans, not

downsizing.

Source of income?

Social Security,

guaranteed pension,

annuities, 401(k)/IRA,

real estate financial

gain from downsizing?

8

Deciding “When” Affects Benefits CRITICAL FACTORS

Monthly benefit amounts differ based on the age you decide to start receiving benefits.

This hypothetical example assumes a benefit of $1,000 at a full retirement age of 66

AGE YOU CHOOSE TO START RECEIVING BENEFITS

MO

NT

HLY

BE

NE

FIT

AM

OU

NT

$800$866

$1,000$1,080

$1,160$1,240

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

62 63 64 65 66 67 68 69 70

$1,320

$750

$933

Source: “When To Start Receiving Retirement Benefits,” SSA Publication No. 05-10147 (socialsecurity.gov).

• Spousal benefits could be reduced in monthly income

and survival benefits

• Children under 18 may be eligible for survivor benefits

Decision impacts family

9

Impact When You Keep WorkingCRITICAL FACTORS

Social Security is complex.

Learn more at socialsecurity.gov/planners

Social Security benefits until

full retirement age

• You receive the maximum

amount due you

• Any continuing employment

earnings will not have an

adverse effect on your Social

Security benefits

Social Security benefits while

continuing to work

• You could experience a

50% reduction in your Social

Security benefits

If you don’t take If you take

10

Five Key Risks to Lifetime Income

You may live longer than you think. Plan accordingly.

Source: Annuity 2000 Mortality Table, Society of Actuaries. Figures assume a person is in good health.

Male, age 65 Living to 85 Living to 92

Female, age 65 Living to 88 Living to 94

Couple, both age 65 One will live to 92 One will live to 97

Many people will exceed the

average life expectancy

for their age group.

Here are their odds:50% 25%

FIVE KEY RISKS

11

Inflation

The effect of inflation on purchasing power.

All numbers were calculated based on hypothetical rates of inflation of 2%, 3%, and 4% (the historical average from 1926 to 2013 was 3%) to show the effects of

inflation over time. Actual inflation rates may be more or less and will vary.

FIVE KEY RISKS

Even at a low inflation rate of 2%, in 25 years $50,000 will buy as much as $30,477 buys today

$60,000

DO

LLA

RS

$50,000

$40,000

$30,000

$20,000

$10,000

$0

Today 5 Years 10 Years 15 Years 20 Years 25 Years

YEARS FROM RETIREMENT START DATE

$50,000

$18,756 at 4% inflation

$23,880 at 3% inflation

$30,477 at 2% inflation

12

Asset Allocation

Retirees may need stocks for the long haul.

This graph is for illustrative purposes only and does not represent actual or implied performance of any investment option. All indices are unmanaged and it is not

possible to invest directly in an index. The graph represents the average annual return percentage for the investment categories shown from 1926 to 2013 from

Ibbotson Associates. Past performance is no guarantee of future results. Returns include the reinvestment of dividends and other earnings. Domestic stocks are

represented by the Standard & Poor’s 500 Index (S&P 500®). Foreign stocks (international equities) are represented by the MSCI® EAFE® Index for the period from

1970 to the last calendar year. Foreign stocks prior to 1970 are represented by the S&P 500. Bonds are represented by the U.S. Intermediate Government Bond

Index. Short-term investments are represented by U.S. Treasury bills. Inflation is represented by the Consumer Price Index. U.S. stock prices are more volatile than

those of other securities. Government bonds and corporate bonds have more moderate short-term price fluctuation than stocks but provide lower potential long-term

returns. U.S. Treasury bills maintain a stable value (if held to maturity), but returns are generally only slightly above the inflation rate. See “Methodology and

information” on slide 25 for further details. Asset allocation does not ensure a profit or protect against a loss.

FIVE KEY RISKS

COMPARISON OF AVERAGE ANNUAL RISING COSTS VS. AVERAGE ANNUAL INVESTMENT RETURNS 1926–2013

EXAMPLES OF TARGET ASSET MIXES DESIGNED TO MEET VARIOUS GOALS

Conservative Balanced Growth Aggressive growth

14% Domestic stock

6% Foreign stock

50% Bonds

30% Short-term

35% Domestic stock

15% Foreign stock

40% Bonds

10% Short-term

49% Domestic stock

21% Foreign stock

25% Bonds

5% Short-term

60% Domestic stock

25% Foreign stock

15% Bonds

AVERAGE ANNUAL PORTFOLIO RETURNS (1926–2013)

Inflation

Healthcare costs*

3.0%

7.96%8.97% 9.64%

6.2%

RISING COSTS

* Data for health care costs is from the Centers

for Medicare and Medicaid Services, National

Health Expenditures Estimates 2012–2022.

6.1%

13

Rate of Withdrawal

Higher withdrawal rates can derail your plan no matter what your asset mix

Source: Fidelity Investments. Hypothetical value of assets held in an untaxed balanced portfolio and growth portfolio and inf lation-adjusted withdrawal rates as

specified. Stocks, bonds, and short-term investments are represented by the S&P 500, U.S. Intermediate Term Government Bonds, and 30-day U.S. Treasury Bills,

respectively. Returns for stocks, bonds, short-term investments, and inflation are based on the risk premium approach. Actual rates of return may be more or less. The

chart is for illustrative purposes only and is not indicative of any investment. Past performance is no guarantee of future results.

See “Methodology and information” on slides 25 and 26 for further details.

FIVE KEY RISKS

0

10

20

30

40

6% 8% 10%

10 yrs 9 yrs

32 yrs

36 yrs

13 yrs

19 yrs

12 yrs

17 yrs

GROWTH PORTFOLIO

70% Stocks

25% Bonds

5% Short-term

YE

AR

S P

OR

TF

OLIO

MA

Y L

AS

T IN

AN

EX

TE

ND

ED

PO

OR

MA

RK

ET

INFLATION-ADJUSTED WITHDRAWAL RATE

BALANCED PORTFOLIO

50% Stocks

40% Bonds

10% Short-term

4%

14

Health Care Costs

1. Fidelity Benefits Consulting, 2015. The estimate assumes no employer-provided retiree health care coverage and applies to retirees with traditional Medicare

insurance coverage with life expectancies in retirement of 17 years for men and 20 years for women.

2. Centers for Medicare and Medicaid Services, National Health Expenditures Projections 2012–2022.

FIVE KEY RISKS

$245,000 Lifetime out-of-pocket health

care expense estimate for a

65-year-old couple1

6.2%annually from 2015–20222

And costs are expected to rise

16

Understanding Health Care Costs

Out-of-pocket

prescription

drug expenses

Out-of-pocket

for Medicare,

Part B & D

premiums

People may underestimate these

costs by more than 50%2

$245,000Out-of-pocket health care expense

estimate for a 65-year-old couple2

23%

33%

1. Fidelity Benefits Consulting, 2015. Based on a hypothetical couple retiring in 2015, 65 years or older, with average (82 male, 85 female) life expectancies.

Estimates are calculated for "average" retirees, but may be more or less depending on actual health status, area of residence, and longevity. Assumes individuals

do not have employer-provided retiree health care coverage, but do qualify for Medicare. The calculation takes into account cost-sharing provisions (such as

deductibles and coinsurance) associated with Medicare Part A and Part B (inpatient and outpatient medical insurance). It also considers Medicare Part D

(prescription drug coverage) premiums and out-of-pocket costs, as well as certain services excluded by Medicare. 2. Fidelity-sponsored HSA Survey, conducted by

GfK Public Affairs & Corporate Communications, February 2013. The HSA survey was conducted by GfK Public Affairs & Corporate Communications from February

4 to 20, 2013. The study was conducted among a nationally representative sample of 1,836 U.S. adults ages 25–64 with a household income of $25,000 or more.

Respondents also have primary or shared responsibility for household financial decisions and receive health care benefits through their own or their spouse's

employer. Nearly half (48%) of the pre-retirees aged 55–64 surveyed estimated they would need only $50,000 for health care expenses in retirement.

FIVE KEY RISKS

Medicare

cost-sharing

provisions

44%

18

Pre-retirees Need Help

The Fidelity Advisor 2013 Retirement Income survey found that:

4 5of pre-retirees

have no retirement

income plan

of pre-retirees

don’t know how

long to plan for

pre-retirees know

it’s important to

have a plan

out of

Almost

5177%

Source: Fidelity Advisor 2013 Survey of Investors at Retirement, July 2013. Conducted by Research Now on behalf of Fidelity Investments, this survey included 1,886

investors between the ages of 50 and 75 with investable assets of $100,000 or more. Fidelity Investments was not identified as the survey's sponsor

RETIREMENT INCOME PLANNING

19

Getting Started

Emphasizes budget and expense projections

in the near term rather than 20 or 30 years out

Can be created quickly

Starts by focusing on the first three years of retirement

A Simplified Retirement Income Plan:

RETIREMENT INCOME PLANNING

20

Budgeting

The Fidelity budgeting discussion worksheet:

• Uncovers clients’ ongoing cash outflows on big-

ticket items and guaranteed income as they

enter retirement

• Allows you to project clients’ future expenses

based on gathered information

• Presents a near-term view of their financial future

RETIREMENT INCOME PLANNING

21

And inflows

Cash outflows today

Budgeting Information

Review with your advisor:

• HousingMortgages, equity lines, utilities and taxes, planned

upgrades or renovations

• Health careMedicare or employer-funded plan, life and long-term

care insurance

• Family and educationDependent children, existing and anticipated school and

college expenses

• Lifestyle and otherDo you plan to travel extensively or buy a big-ticket item

such as a boat or RV?

• AssetsSocial Security, defined benefit plans, 401(k), savings,

annuities, and real estate

RETIREMENT INCOME PLANNING

22

Taking Action

Generate a retirement income plan composed of

three separate pools of money:

RETIREMENT INCOME PLANNING

Liquidity Capital Preservation Long-term Growth

• Focuses on near-term needs

• Provides for short-term cash flow

• Invests for lower risk

• Provides for expenses and “unknowns” 4 to 7 years out

• Invests for growth without excessive risk

• Provides for financial needs 8+ years out

• Affords time to weather market volatility

• Invests in U.S. and international equities and fixed-income

23

Check your health care expense estimates

Bucket essential and discretionary expenses

Review your sources of income

Create a plan to ensure that your health care

and other essential expenses are covered

Your Advisor Can Help You:

Develop a financial strategy for discretionary spending

Develop a Written Plan With Your AdvisorRETIREMENT INCOME PLANNING

24

• Medicare.gov

• Eldercare.gov

• AARP.org

• State Health Insurance Programs (SHIPtalk.org)

• Benefitscheckup.org

• SocialSecurity.gov

Sources to Help Make Informed Decisions

Online resources:

For guidance, look to your experienced, dedicated financial advisor:

Stephen Karam

Karam Financial Group

Phone: 508-679-2704

stevek@karamfg.com

Karam Financial Group and Fidelity Investments are independent entities.

25

Methodology and Information (Slides 12 & 13)IMPORTANT: Any projections and simulations are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

Over time, results may vary with each use. It is not possible to invest directly in an index. All indices include reinvestment of dividends and interest

income. Although past performance does not guarantee future results, it may be useful in comparing alternate investment strategies over the long term.

Performance returns for actual investments will generally be reduced by fees or expenses not reflected in these hypothetical illustrations.

On slide 12: Generally, among asset classes, stocks may present more short-term risk and volatility than bonds or short-term instruments but may provide greater

potential return over the long term. Although bonds generally present less short-term risk and volatility than stocks, bonds contain interest rate risk (as interest rates

rise, bond prices usually fall); the risk of issuer default; and inflation risk. U.S. Treasury bills maintain a stable value (if held to maturity), but returns are generally only

slightly above the inflation rate. Foreign investments, especially those in emerging markets, involve greater risk but may offer greater potential return than U.S.

investments.

The target asset mixes are hypothetical models and illustrate certain examples of many possible combinations of investment al locations that could help an investor

pursue his or her goals; these target asset mixes do not constitute investment advice under the Employee Retirement Income Security Act of 1974 (ERISA). You

should choose your own investments based on your particular objectives and situation.

On slide 13: Information is not intended to project or predict the present or future value of the actual holdings in a participant’s portfolio or the performance of a given

model portfolio of securities. The calculations and results generated for this chart are based on historical monthly performance from January 1972 through December

2012 from Ibbotson Associates. Stocks, bonds, and short-term investments are represented by the S&P 500, U.S. Intermediate-Term Government Bonds, and U.S.

30-day T-bills, respectively. The estimated returns for the stock and bond asset classes are based on a “risk premium” approach. The risk premium for these asset

classes is defined as their historical returns relative to a 10-year Treasury bond. Risk premium estimates for stocks and bonds are each added to the 10-year Treasury

yield. Short-term investment asset class returns are based on a historical risk premium added to an inflation rate, which is calculated by subtracting the TIPS (Treasury

Inflation-Protected Securities) yield from the 10-year Treasury yield. This method results in what we believe to be an appropriate estimate of the market inflation rate

for the next 10 years. Each year (or as necessary), these assumptions are updated to reflect any movement in the actual inflation rate. Volatility of the stocks

(domestic and foreign), bonds, and short-term asset classes is based on the historical annual data from 1926 through the most recent year-end data available from

Ibbotson Associates, Inc. Stocks, bonds, and short-term are represented by the S&P 500, U.S. Intermediate Term Government Bonds, and 30-day U.S. Treasury bills,

respectively. Annual returns assume the reinvestment of interest income and dividends, no transaction costs, no management or servicing fees, and the rebalancing of

the portfolio every year.

The information highlights varying levels of stocks, bonds, and short-term investments. The purpose of these hypothetical illustrations is to show how portfolios may be

created with different risk and return characteristics to help meet a participant’s goals. You should choose your own investments based on your particular objectives

and situation. Remember, you may change how your account is invested. Be sure to review your decisions periodically to make sure they are still consistent with your

goals. You should also consider all of your investments when making your investment choices.

Index Definitions

The S&P 500 Index is a registered service mark of the McGraw-Hill Companies, Inc., and has been licensed for use by Fidelity Distributors Corporation and its

affiliates. It is an unmanaged index of the common stock prices of 500 widely held U.S. stocks and includes reinvestment of dividends. It is not possible to invest

directly in the index.

U.S. Intermediate Government Bond Index is an unmanaged index that includes the reinvestment of interest income.

MSCI EAFE (Europe, Australasia, Far East) Index is an unmanaged market capitalization-weighted index that is designed to represent the performance of developed

stock markets outside the United States and Canada and assumes the highest possible withholding taxes are applicable.

The Consumer Price Index is a widely recognized measure of inflation calculated by the U.S. government that tracks changes in the prices paid by consumers for

finished goods and services.

U.S. Treasury bills are backed by the full faith and credit of the U.S. government.

629746.5.1 1.951771.103

1115

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For participants.

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or completeness of this information. Consult an attorney or tax advisor regarding your specific legal or tax situation.

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