University of Nevada, Reno

Analyzing Defined Benefit Pensions: How Do Various Distribution Methods Affect an Individual’s Financial Independence?

A thesis submitted in partial fulfillment of the requirements for the degree of

Bachelor of Science in Finance and Economics and the Honors Program

by

Alyssa Yocom

Dr. Thomas Liesz, Thesis Advisor

May, 2017

UNIVERSITY OF NEVADA THE HONORS PROGRAM RENO

We recommend that the thesis prepared under our supervision by

ALYSSA J. YOCOM

entitled

Analyzing Defined Benefit Pensions: How Do Various Distribution Methods Affect an Individual’s Financial Independence?

be accepted in partial fulfillment of the requirements for the degree of

BACHELOR OF SCIENCE, FINANCE AND ECONOMICS

______Thomas Liesz, Ph.D., Thesis Advisor

______Tamara Valentine, Ph. D., Director, Honors Program

May, 2017 i

Abstract

Nearly one third of the U.S. population is between ages 50 and 79 meaning that they are nearing or currently in the early years of retirement. Individuals tend to seek financial planning advice as they plan for retirement. The baby boomer generation that is currently retiring worked when defined benefit pension1 plans were the most commonly offered company-sponsored retirement plan. 78 percent of state and local government workers were participating in a defined benefit pension plan and 49 percent of private companies with 500 or more workers offered defined benefit pensions (Rafter, 2013).

A defined benefit pension plan is a type of retirement account where an employer agrees to a pre-specified payment amount to an employee at retirement. The payment of the defined benefit pension plan can be distributed in various ways. The retiree may take a lump sum, a partial lump sum and 50% joint survivor annuity, a single life annuity, or a 50% joint and survivor annuity. Defined benefit pensions will distribute as a 50% joint and survivor annuity by default.

Existing research discusses trends in retirement and various investment techniques retirees should consider but there is no analysis on how defined benefit pension distribution methods may affect an individual’s financial independence. Financial independence is achieved when an individual has enough liquid assets to support his or her standard of living and cash needs through the end of his or her life. This thesis conducts a case study on a hypothetical married couple, John and Jane Doe, and uses financial plan scenarios to understand the effects defined benefit pension distribution methods have on an individual’s financial independence.

1 Any financial term used throughout this thesis is bolded and a definition is provided in Appendix A on page 28 ii

Table of Contents

Abstract ...... i List of Tables ...... iv List of Figures ...... v Chapter 1: Introduction ...... 1 History of Financial Planning ...... 1 Planning for Retirement ...... 2 Defined Benefit Pension Plans ...... 4 Chapter 2: Review of Literature ...... 7 Common Financial Advice for Retirees ...... 7 Retirement Investment Risk ...... 9 The Decline of Defined Benefit Pension Plans ...... 10 The Need to Understand Defined Benefit Pensions ...... 12 Chapter 3: Methodology and Case Assumptions ...... 14 Methodology ...... 14 Case Assumptions ...... 14 General Assumptions ...... 14 Savings and Investment Assumptions ...... 15 Personal Asset Assumptions ...... 17 Retirement Asset Assumptions ...... 18 Income and Expense Assumptions ...... 19 Defined Benefit Pension Distributions ...... 20 Chapter 4: Components of a Financial Plan ...... 22 Tax Projection Report ...... 22 Cash Flow Statement ...... 23 Balance Sheet ...... 24 Financial Independence Report ...... 25 Chapter 5: Results and Conclusion ...... 27 Results ...... 27 Discussion of Scenario 1: Lump Sum Distribution ...... 28 Discussion of Results ...... 29 Significance ...... 31 References ...... 33 Appendix A: Definition of Terms ...... 37 iii

Appendix B: Financial Plan Scenario 1 – Lump Sum ...... 40 Tax Projection Report ...... 40 Cash Flow Statement ...... 45 Balance Sheet ...... 56 Financial Independence Report ...... 62 Appendix C: Financial Plan Scenario 2 – Partial Lump Sum & 50% Joint and Survivor Annuity ...... 63 Tax Projection Report ...... 63 Cash Flow Statement ...... 68 Balance Sheet ...... 80 Financial Independence Report ...... 86 Appendix D: Financial Plan Scenario 3 – Single Life Annuity ...... 87 Tax Projection Report ...... 87 Cash Flow Statement ...... 92 Balance Sheet ...... 104 Financial Independence Report ...... 110 Appendix E: Financial Plan Scenario 4 – 50% Joint and Survivor Annuity ...... 110 Tax Projection Report ...... 110 Cash Flow Statement ...... 116 Balance Sheet ...... 128 Financial Independence Report ...... 134

iv

List of Tables

Table 1: Defined Benefit Distribution Amounts ...... 21

Table 2: Tax Projection Report Sample ...... 21

Table 3: Cash Flow Statement Sample…………………………………………………………..24

Table 4: Balance Sheet Sample………………………………………………………………...... 25

Table 5: Financial Independence Results………………………………………………………..28

v

List of Figures

Figure 1: Distribution of Retirement Savings for Baby Boomer Generation ...... 3

1

Chapter 1: Introduction

History of Financial Planning

While individuals have been seeking financial advice for many years, modern financial planning really begins in the 1970s. The first graduating class of the College of

Financial Planning entered the professional world in 1973, just in time for a rapidly changing financial world to emerge. During the 1970s, many political and economic pressures worked together to create a recession: oil price shocks followed the creation of the Organization of the Petroleum Exporting Countries (OPEC), the Watergate hearings led to the resignation of President Nixon, and the conclusion of the Vietnam War placed many unemployed soldiers into the economy. “Stagflation” emerged as a new word defining the 1970s as a period with stagnant wages and continued inflation. Ultimately, the economics of the 1970s led to the complicated financial markets we have today.

Since the 1970s, the types of assets that people invest in have evolved; the global economy has shifted; and the United States tax codes are constantly changing. Financial markets are evolving and becoming increasingly complicated. It requires a lot of research, understanding, and analysis to be able to successfully and confidently plan for retirement in an environment with diversified investment opportunities and their subsequent tax implications. Due to complicated investing options and strategies, many individuals seek professional help from a financial planner. A significant number of the people seeking financial advice are individuals who are beginning to plan for retirement.

With the evolution of the financial world, far more pressure has been placed on the individual saver to make wise choices to support his or her cash needs during retirement 2 with the help of a financial planner (V. Schultz, personal communication, January 18,

2017).

Planning for Retirement

PricewaterhouseCoopers (PwC) conducts an Employee Wellness Survey each year that tracks the financial and retirement well-being of working U.S. adults nationwide. Figure 1 below shows the distribution of retirement savings for the baby boomer generation, which includes all people born from 1946 to 1964

(PricewaterhouseCoopers, 2016). The dollar amount saved for retirement excludes the value of a home. 37 percent of the baby boomer generation has saved less than $50,000 for retirement and only 24 percent have saved more than $300,000. If an individual expects to live 20 years after they retire and they have saved $300,000 for retirement, the individual will have an average of $15,000 a year to spend. 3

Figure 1: Distribution of Retirement Savings for Baby Boomer Generation

40% 37% 35%

30%

25%

20% 14% 15% 15% 13% 12% 9%

10% % of Baby Baby of % Boomer Population 5%

0% Less than Between Between Between Between More than $50,000 $50,000 and $100,000 and $200,000 and $300,000 and $500,000 $100,000 $200,000 $300,000 $500,000

Dollar Amount of Personal Savings

(PricewaterhouseCoopers, 2016)

The distribution of savings in Figure 1 demonstrates the need for additional income in retirement. When an individual retires, he or she can typically expect to receive

Social Security income in addition to income from a company-sponsored retirement plan.

52 percent of baby boomers plan to retire later than they previously planned due to not having enough money saved (PricewaterhouseCoopers, 2016). The baby boomer generation will rely heavily on income from company-sponsored retirement plans to meet their retirement income needs. Each company’s retirement plan is unique and often confusing to an individual so individuals seek retirement planning assistance for financial planners (V. Schultz, personal communication, January 18, 2017). According to PwC’s

Employee Wellness Survey, 43 percent of baby boomers are seeking financial advice from an independent financial planner or a broker or investment advisor. 4

Financial planning clients approaching retirement want to know how their lifetime savings and company-sponsored retirement plans will support them in retirement.

Questions they ask their financial planner may include: Can I maintain my current standard of living with just my savings or do I need to keep working? How do I receive money from my employer’s 401(k) or pension plan? How do required minimum distributions in Individual Retirement Accounts work? What are the tax implications of income after retirement? How do I plan for future medical or living expenses? (Yeske,

2016). Financial planners are able to analyze a client’s unique case in order to provide recommendations that will help an individual prepare for retirement. This thesis will analyze how various distribution methods of a defined benefit pension plan may affect an individual’s financial independence.

Defined Benefit Pension Plans

Defined benefit pension plans were the most popular form of retirement plans up to the mid-1900s. These plans were widely available to employees of public service, government, manufacturing, mining, and higher education. The Bureau of Labor

Statistics shows that 78 percent of state and local government workers were participating in a defined benefit pension plan and 49 percent of private companies with 500 or more workers offered defined benefit pensions (Rafter, 2013). The baby boomer generation was the primary working generation during the defined benefit pension’s most popular years. According to the U.S. Census (2016), 17 percent of the U.S. population is ages 60-

79 which means they are in or near the early years of retirement and 31 percent of the

U.S. population is between ages 50 and 79. With 31 percent of the population 5 approaching retirement or entering the early years of retirement, it is critical that financial advisors are aware of how these plans work.

A defined benefit pension plan is a type of retirement plan where an employer agrees to a pre-specified payment amount to an employee at retirement (Internal Revenue

Service, “Choosing a retirement plan,” 2016). The value of the defined benefit pension at retirement is pre-determined by a formula. The formula encompasses an employee’s tenure, experience, and age (Leimberg, Satinsky, Doyle, & Jackson, 2009). Often, the pension will pay a percentage of the average earnings that an employee received during a period of work and the pension distributions are made monthly (Pippin, 1996).

The payment of the defined benefit pension plan can be distributed in various ways. The four most common distribution methods for defined benefit pensions are: a lump sum, a partial lump sum and 50% joint survivor annuity, a single life annuity, or a

50% joint and survivor annuity. A 50% joint and survivor annuity means that the retiree will receive a smaller annuity so that when he or she passes away, the spouse will also receive an annuity. Defined benefit pensions will distribute as a 50% joint and survivor annuity by default (V. Schultz, personal communication, January 18, 2017).

This thesis will examine how the distribution method of a defined benefit pension plan affects an individual’s financial independence. Each distribution method will represent one financial plan scenario. Since each distribution method alters annual income, the cash flows, net worth, and financial independence values will also change across scenarios. Financial independence is a value that measures the amount of liquid assets an individual has at the end of his or her lifetime. If the financial independence number is positive, an individual has enough liquid assets to cover all cash needs and will 6 have some money to leave to heirs. Analyzing the financial independence for each distribution method will provide financial planners with a clearer understanding of the affects that a pension may have on a client.

Nearly one-third of the U.S. population is approaching or currently in the early years of retirement (U.S. Census, 2016). A majority of those retiring will rely on their company-sponsored retirement plan to meet their income needs during retirement.

Defined benefit pension plans were widely available to the baby boomer generation and many will retire with one of these plans. A retiree with a defined benefit plan has the option to select a distribution method and the individual’s choice may significantly affect his or her financial independence. This thesis will analyze four distribution methods to understand how each may affect an individual’s financial independence.

7

Chapter 2: Review of Literature

Common Financial Advice for Retirees

There are a few common techniques financial advisors offer to their client when a her or she wants to know how to manage his or her Individual Retirement Account (IRA) or savings accounts in retirement. One technique is the “four percent rule.” This rule states that “a retiree may withdraw four percent of his or her savings in the first year of retirement, and adjust for inflation in subsequent years” (Klinger, 2016). This rule was developed because it worked when applied to 30 years of historical returns, but is not always accurate in predicting future cash needs for a particular individual (Klinger,

2016). The four percent rule is most beneficial when an individual has a retirement plan and social security income to rely on in addition to their savings. However, the four percent may not be enough to meet cash needs in retirement for everyone. For example, if someone only has $100,000 in savings, withdrawing four percent would only give them

$4,000 to meet their cash needs for the year.

A different study on retirees indicates that an annuity is the best way for someone to get higher income during retirement (Schulaka, 2016). An annuity provides continuous monthly or annual distributions for the lifetime of the recipient. For example, the annuity distribution options for a defined benefit pension guarantee a monthly payment to the pension recipient for the duration of his or her life. The annuity amount does not receive a cost of living increase over time. The major risk with annuities is that it bets on someone’s life expectancy. For example, if the annuity recipient lives for many years after retiring, the annuity is distributed for many years and the retiree receives the full benefit of his or her retirement plan. However, if the recipient retires then passes away 8 shortly thereafter, the retiree will have received only a portion of his or her deserved benefit and the spouse will be left with very little income to live on. Because of this, by default, defined benefit pensions are distributed as 50% joint and survivor annuities.

These annuities are reduced to cover both the recipient and the spouse’s lifetimes. This method is particularly beneficial to individuals who have long life expectancies, are concerned about income once the first spouse passes away, or have a spouse that is much younger than the recipient.

Another common technique is the 60/40 rule. The 60/40 rule recommends that 60 percent of the portfolio be invested in equities and the other 40 percent in fixed income.

Equities are higher-risk investments because they move with the stock market but they also provide the most potential for appreciation in value. Fixed income is a low-risk investment because it has very low correlation with the stock market. 40 percent of an individual’s portfolio would be protected while the other 60 percent would be subject to the volatility of the stock market. The 60/40 rule is helpful for guiding investors but the

60/40 asset allocation model is not applicable to everyone. An investor with the goal of preserving their current capital may want to put more than 40 percent into fixed income while an investor who wants to achieve maximum growth in value of their money may want to allocate more than 60 percent of their portfolio to stocks.

The 100 subtract age rule has emerged as a popular investment technique in financial planning journals (V. Schultz, personal communication, January 18, 2017). This rule recommends than an investor subtracts his or her age from 100 then rebalances his or her investment portfolio so that the solution is equal to the percent of equities in the 9 investment portfolio. For example, if someone is 65 years old, he or she would want to rebalance his or her portfolio so that 35% is in equities and 65% is in fixed income.

While these common techniques and recommendations are helpful, they certainly do not apply to every individual. A study of North Carolina state and local government retirement systems found that workers would pass on “substantial monetary benefits due to a lack of knowledge, understanding, or accessibility to benefits” (Clark & Morrill,

2014). It is imperative that a financial advisor analyze the client’s benefits and needs prior making recommendations.

Retirement Investment Risk

The levels of risk tolerance vary from person to person. Young investors who have many years to make up for losses can afford to invest in riskier assets. However, retirees are typically risk averse because they do not have time to make up for losses.

Retirees tend to invest in low-risk assets such as bonds or conservative mutual funds to preserve their current wealth (V. Schultz, personal communication, January 18, 2017).

Risky assets, such as stocks, tend to bear high returns, but they may also may bring big losses to investors. Financial planners should be conscious of the changing risk tolerance level of their clients as their clients enter their retirement years: an annual review and re- allocation of a client’s portfolio can significantly benefit a retiree (Altfest, 2004; Fink,

2016). An individual has the option to invest his or her Individual Retirement Account

(IRA). A company is responsible for investing a company-sponsored retirement plan, such as a 401(k) or defined benefit pension.

Considerable risk is associated with investing in retirement plans. When an employee has no discretion on where his or her retirement funds are invested, an 10 employer may take more risk and end up losing the value of the pension (Easterday &

Eaton, 2012). The defined benefit pension plan guarantees payment in retirement regardless of how the investments perform, which is a large risk for companies.

Easterday and Eaton (2012) state that “the pension obligations of many organizations are outpacing their ability to fund them” (22). Baby boomers are retiring rapidly and pension administrators are struggling to meet their pension distribution obligations to retirees.

To keep up with the withdrawal requests, pension administrators are investing in riskier assets hoping to grow the pension enough to keep pace with the withdrawal requests. The obligation to pay more money out to retired employees than a company has available is causing companies, such as American Airlines in 2012, to go bankrupt (Easterday &

Eaton, 2012).

A defined contribution pension requires the employer to contribute a fixed percentage or amount to the retirement plan but gives the employee some control over how the retirement plan invested. The plan has a fixed contribution, but there is no fixed benefit amount since retirement income is dependent on the plan’s investment performance. Defined contribution plans grew in popularity over defined benefit plans in part because employees wanted to control how their retirement money was invested

(Silam, Starks, & Zhang, 2015).

The Decline of Defined Benefit Pension Plans

A study done in 2014 found that public defined benefit pension plans had more risk than private defined contribution pension plans. Specifically, “pension funds in states facing fiscal constraints allocate more assets to equity and have higher betas” (Mohan &

Zhang, 2014). In finance, beta is a market risk measurement: a higher beta value means 11 that an investment or portfolio takes on more risk. Public pension funds tend to take on higher risk following years of low or insufficient returns in order to meet the pension’s distribution obligations. This investing habit has led to a nation-wide issue of having pension obligations to meet and insufficient assets to meet those obligations (Mohan &

Zhang, 2014). Taking higher risk is one way to achieve higher returns, but it often can lead to much larger losses.

The employer with a defined benefit pension plan is responsible for both contributing and investing the money (Retirement Planning, 2006). The employer offering the plan is fully responsible for administering the pension, so they assume all investment risk. The pension administrator invests defined benefit pension plans and payment of the pension at retirement is guaranteed, regardless of investment performance

(Pippin, 1996). In order to ensure that retirees will receive their defined benefit pensions, employers that offer defined benefit retirement plans must pay monthly insurance premiums to the Pension Benefit Guaranty Corporation (PBGC). A majority of private defined benefit pension plans are insured by PBGC (Pension Benefit Guaranty

Corporation, 2000). This monthly premium is an expensive element of administering a defined benefit pension. When employers eliminated defined benefit pensions, they eliminated the investment risk and the costs associated with the Pension Benefit Guaranty

Corporation insurance. In the 1980s, the dramatic shift away from defined benefit plans and toward defined contribution plans began. This shift was in response to costs and flexibility for both employers and employees (U.S. Bureau of Labor Statistics, 2012).

12

The Need to Understand Defined Benefit Pensions

During retirement, an individual relies on their savings and retirement accounts for income. A retiree’s income consists of social security income, Individual Retirement

Accounts (IRAs), and a company-sponsored retirement plan such as a 401(k), defined benefit, or defined contribution plan. The baby boomer generation is at or nearing the retirement age and many of these baby boomers have defined benefit pensions. 43 percent of the baby boomer generation seeks financial advice from financial planners.

With more defined benefit pensions surfacing in retirement conversations, it is important for financial planners to understand how these plans work and how they can affect an individual client.

Studies have been conducted regarding the implications for companies that offer defined benefit pensions. Whether a retiree elects to receive a lump sum distribution or an annuity payment over time has been examined. However, no research on how the varying distribution methods of a defined benefit pension affects an individual specifically. By default, a defined benefit pension is distributed as a 50% joint and survivor annuity.

However, pension recipients have other distribution options.

Defined benefit pensions and how they may affect an individual is an especially important consideration for the individuals who do not have personal savings. Without personal savings, an individual relies entirely on their pension and social security income to meet any cash needs during retirement. Defined benefit pension distributions can greatly affect an individual’s portfolio and ability to preserve wealth in the long-run

(Lowry, 2016). It is important for both the individual retiree and for their financial advisor to consider how a retirement plan’s distribution method will affect their taxes, 13 standard of living, and investment portfolio (Warshawsky, 2016). While defined benefit pension plans are only one type of retirement account that someone may have, they can greatly affect a person’s tax bracket, cash flows, and financial independence.

With one third of the U.S. population at or approaching retirement age, it is critical for both retirees and financial advisors to consider the impacts of investment and retirement planning decisions. No single investment technique will fit the unique needs every individual has in retirement. After considering an individual’s standard of living, existing savings, risk tolerance, and other elements, financial planners can more adequately make recommendations that meet their clients’ individual needs. The next chapters of this thesis will examine a case study to better understand how defined benefit pension distribution methods may affect an individual and their financial independence.

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Chapter 3: Methodology and Case Assumptions

Methodology

This thesis will use Exec Plan software to produce the financial plan. Exec Plan is a commercial financial planning software that was written by Certified Public

Accountants. It utilized case assumptions, data input, and current tax codes to produce its projections. The financial plan and its projections are used to understand the effects a defined benefit pension plan may have on an individual’s financial independence. All data inputs come from the case assumptions.

The financial plan is for a hypothetical married couple, John and Jane Doe. John was born November 22, 1952 and Jane was born July 9, 1955. John will turn 65 in 2017 and Jane will turn 62 in 2017. Both John and Jane will retire during the year they each turn 65. In John’s case, he will retire in 2017 and begin to receive his defined benefit pension in 2018. All case assumptions and research supporting the assumptions are listed in the following section.

Case Assumptions

General Assumptions

1. Life expectancies were calculated using the Social Security Administration’s Life

Expectancy Calculator (Social Security Administration, “Retirement and

survivors benefits,” 2016). John Doe is projected to live until he reaches age 84 in

2036 and Jane Doe is projected to live until she reaches age 86 in 2041.

2. John will retire during 2017 at the age of 65 and will begin receiving his

retirement benefits in 2018. Jane will retire during 2020 at the age of 65. Jane 15

does not have a company-sponsored retirement plan. Based on birth years, John’s

full retirement age is 65 and Jane’s is 66 according to the Social Security

Administration. Jane will receive half of John’s Social Security Income amount

until she is 70 so retiring at age 65 does not affect her Social Security benefit

amount (Social Security Administration, “Full retirement age,” 2016).

3. John and Jane have two children that are grown and financially independent. John

and Jane have no dependents.

4. Neither John nor Jane will receive an inheritance during the course of this

financial plan.

5. John and Jane are both considered healthy and do not anticipate any large medical

expenses

6. Inflation is projected at 3% annually for the entirety of the plan. The Federal

Reserve has an annual target inflation rate of 2%; however, the actual historical

average is 3.22% (McMahon, 2017).

7. John and Jane’s financial goal is to have enough money to support their current

standard of living in retirement and the more money they have to leave to their

heirs at the end of their lives, the better. This is a common long-term goal for

retirees (V. Schultz, personal communication, January 18, 2017).

Savings and Investment Assumptions

8. A cash balance of approximately $1,000 is maintained throughout the plan. This

is a balancing feature of the Exec Plan software and is referred to as “idle cash.”

Idle cash is used in the cash flow statement. Exec Plan starts with the $1,000 then 16

adds John and Jane’s income, subtracts expenses, and any balance left that is over

$1,000 is then added to additional savings or is spent.

9. If there is excess cash at the end of any given year, 90% of the excess cash is

invested into an investment portfolio and yields an annual 4% rate of return. This

is titled “additional savings.”

10. John and Jane have a money market investment account worth $20,000 at the

beginning of the plan. The money market account is projected to increase at an

interest rate of 0.05% in 2017, 0.50% in 2018, 1.00% in 2019, 1.50% in 2020, and

2.00% in 2021 and all years following. The interest rates are estimated from the

current low but raising interest rate environment (V. Schultz, personal

communication, January 18, 2017).

11. John and Jane have a mutual fund portfolio worth $100,000 at the start of the

financial plan. Their mutual fund portfolio is invested 60% in equity and 40% in

fixed income. A common asset allocation technique is to follow the “60/40 rule”

where 60% of the portfolio is invested in stocks and 40% is invested in bonds (V.

Schultz, personal communication, January 18, 2017).

12. The mutual fund portfolio is projected to have a 4% annual return which includes

a combination of annual dividend distributions, annual capital gains distributions,

and annual share price appreciation. All dividends and capital gains are assumed

to be reinvested. A 4% annual return is typical for a conservative investor whose

primary goal is to preserve capital (V. Schultz, personal communication, January

18, 2017). 17

13. In order to make up for any cash deficits, investment assets are sold in the

following order: first, any additional savings that have built up, next, the money

market account, third, the mutual fund portfolio, and finally, retirement accounts.

Personal Asset Assumptions

14. John and Jane’s home has a fair market value of $336,000 at the beginning of

2017 and increases in value by 2% annually. $311,700 is the median home value

and $359,900 is the median price for a home in Reno, Nevada: $336,000 is the

average between the median value and price (“Reno home prices & values,”

2017).

15. The financial plan assumes that John and Jane do not sell their home.

16. Personal property values, other than the home, are not considered in the financial

plan since they are depreciating assets that have no relevancy to the financial

outcome of the plan.

17. New vehicles are assumed to be purchased every 10 years for each John and Jane.

They purchase cars that cost $30,000 in present dollars after trading in the

previously owned vehicle. Each car is purchased with a 5-year 5% auto loan. John

is projected to stop driving in 2034 at age 82. Jane is projected to stop driving in

2037 at age 83. As they stop driving, all related expenses are eliminated. These

vehicle assumptions are common for individuals with similar profiles to John and

Jane Doe (V. Schultz, personal communication, January 18, 2017). 18

Retirement Asset Assumptions

18. Individual Retirement Accounts are assumed to be invested and were projected to

grow at 4% annually. A 4% annual return is typical for a conservative investor

whose primary goal is to preserve capital (V. Schultz, personal communication,

January 18, 2017).

19. Jane contributes 10% of her income to her IRA account up to the maximum

annual contribution amount. IRA contributions stop when she retires. Jane’s IRA

is worth $55,000 at the beginning of 2017.

20. John has an IRA Rollover worth $20,000 at the beginning of 2017. In the scenario

where John takes a lump sum distribution from his Defined Benefit Pension, the

amount is rolled over into his IRA Rollover account. John will not pay tax on the

rollover until he withdraws the funds from his IRA Rollover account beginning at

age 70½. John likely contributed to an IRA when he first started working but

stopped contributing when he got a job that offered a defined benefit pension plan

(V. Schultz, personal communication, January 18, 2017). John’s IRA is a

Rollover account because he is transferring money in from a different retirement

account.

21. IRA distributions were calculated using minimum distribution rules for age 70½

(Internal Revenue Service, “Rollovers of retirement plan,” 2016).

22. John’s defined benefit pension distributions were calculated using a sample

Defined Benefit Pension. Pension annuity amounts do not grow or receive cost of

living adjustments (Time Warner Inc., 2015). 19

Income and Expense Assumptions

23. John’s income in 2017 is $75,000, which is an acceptable average for a male at a

professional level within an organization (U.S. Bureau of Labor Statistics, 2017).

24. Jane’s income in 2017 is $55,000 increasing 2% annually until retirement, which

is an acceptable average for a female at a professional level within an

organization (U.S. Bureau of Labor Statistics, 2017).

25. John’s full retirement age is 65 meaning that his first complete year of retirement

is 2018 (Social Security Administration, “Full retirement age,” 2016). According

to Social Security rules, Jane can receive an amount equal to half of John’s Social

Security income until age 70 when she begins collecting her own Social Security

income. Social Security increases by 1.7% annually, which the Social Security

Administration has published as its average for years 2007 through 2016 (Social

Security Administration, “Cost-Of-Living adjustments,” 2016).

26. Most living expenses are increased by the rate of inflation. DMV fees are adjusted

to reflect the age of the autos and new auto purchases. Property taxes are

increased 2% each year (“Nevada property tax calculator,” 2017).

27. After John’s death in 2036, living expenses such as food, clothing, entertainment,

vacations, and medical insurance are reduced by half.

28. A miscellaneous expense figure of $1,800 increasing annually by the rate of

inflation has been included. This number represents any miscellaneous expenses

not accounted for by the financial plan or unforeseen expenses that may occur.

29. All other living expenses are listed in the cash flow section of appendices B

through E. 20

30. If there is excess cash at the end of any given year, 10% of the excess cash is

spent and it is titled as “lifestyle increase.”

Defined Benefit Pension Distributions

In each financial plan scenario, all factors remained constant with the exception of the distribution method of the defined benefit pension. Scenario 1 provides John Doe with a lump sum distribution. Scenario 2 provides John with a partial lump sum distribution followed by an annuity during his life and a reduced annuity for Jane following John’s death. Scenario 3 provides a single life annuity for John. Scenario 4 provides an annuity to John and a reduced annuity to Jane following John’s death.

Table 1 shows the defined benefit pension amounts that are calculated from Time

Warner’s sample defined benefit plan featured in their 2015 Annual Report. Time Warner has over 24,000 employees and is one of few public companies that publishes data on its defined benefit pension. The left column provides the financial plan scenario and the second column lists the distribution method that correlates to each scenario. If the distribution method is an annuity, the monthly annuity amount is listed in the “monthly” payment frequency column. Since lump sums occur once, they are listed in the “one time” payment frequency column. All values are listed in present dollars. Annuity payments to Jane will only occur after John’s death.

21

Table 1: Defined Benefit Distribution Amounts

Payment Frequency

Scenario Defined Benefit Distribution Method Monthly One Time 1 Lump Sum Distribution Lump Sum to Participant (John) $ 375,803

2 Partial Lump Sum and 50% Joint Survivor Annuity Lump Sum to Participant (John) $ 67,822 Annuity to Participant (John) $ 1,597 Annuity to Beneficiary (Jane) $ 798

3 Single Life Annuity Annuity to Participant (John) $ 2,214

4 50% Joint and Survivor Annuity Annuity to Participant (John) $ 1,947 Annuity to Beneficiary (Jane) $ 973

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Chapter 4: Components of a Financial Plan

The financial plan consists of four scenarios: each distribution method of the defined benefit pension is represented in a financial plan scenario. The four scenarios are:

1) lump sum distribution, 2) partial lump sum and 50% joint and survivor annuity, 3) single life annuity, and 4) 50% joint and survivor annuity. Appendices B through E include the full financial plan for each scenario: Appendix B is the financial plan for scenario 1, Appendix C is the financial plan for scenario 2, Appendix D is the financial plan for scenario 3, and Appendix E is the financial plan for scenario 4. Each scenario produces the following reports: tax projection report, cash flow statement, balance sheet, and financial independence report. The financial plan scenarios are written for John and

Jane Doe, a hypothetical married couple. The financial plan case assumptions found on pages 14 through 20 explain John and Jane Doe’s situation.

Tax Projection Report

The tax projection report takes into consideration earned income, interest and dividends, and itemized deductions. Using current tax codes, the report projects the amount of federal taxes John and Jane Doe should expect to pay each year of the financial planning period in addition to projecting their tax bracket. Many individuals are sensitive to paying taxes. The tax projection report is a useful tool for financial planners because when an individual is on the border of two tax brackets, the advisor may be able to strategically help a client with their itemized deductions and investment strategies to lower his or her taxable income.

Each column of the tax projection report is a year in the financial plan. Below the year, John and Jane’s ages are listed respectively. Each row lists the income and 23 deductions. The numbers in each row are the dollar amount for each item in a given year.

Table 2 below shows a sample from the tax projection report in Appendix B.

Table 2: Tax Projection Report Sample

Financial Plan 2017 2018 2019 2020 2021 Age: 65/62 66/63 67/64 68/65 69/66 Earned Income John's Salary 75,000 0 0 0 0 Jane's Salary 55,000 56,100 57,222 58,366 0

In 2017, John is turning 65 and Jane is turning 62. In 2017, John’s salary will be $75,000 and he will receive no salary thereafter. In 2017, Jane’s salary is $55,000; in 2018, Jane’s salary is $56,100; Jane’s salary increases by 2% annually until she retires at the end of

2020.

Cash Flow Statement

The cash flow statement itemizes John and Jane’s income and expenses. The cash flow statement is a valuable planning tool because it uses current living expenses, case assumptions, and the rate of inflation to show where individuals may need more cash or may need to reduce spending in future years. It also provides the individual with a budget that he or she can follow by tracking actual spending over time.

The cash flow statement reads similarly to the tax projection report. The columns identify the year of the financial plan and the age of John and Jane. The rows list income and uses of cash. Table 3 below is a sample from the cash flow statement in Appendix B.

In 2017, John and Jane spend $1,200 on clothing, $2,000 on entertainment, and $4,000 on 24 vacations. The values increase each year from 2017 to 2021 by a projected 3% rate of inflation.

Table 3: Cash Flow Statement Sample

Financial Plan 2017 2018 2019 2020 2021 Age: 65/62 66/63 67/64 68/65 69/66 Clothing 1,200 1,236 1,273 1,311 1,351 Entertainment 2,000 2,060 2,122 2,185 2,251 Vacations 4,000 4,120 4,244 4,371 4,502

Balance Sheet

The balance sheet provides a snapshot of an individual’s assets and liabilities at the end of each year. The bottom line of the balance sheet is the net worth value. An individual’s net worth is calculated by subtracting the value of his or her liabilities from the value of his or her assets. The balance sheet considers all liquid and non-liquid assets.

In general, an individual wants to see the net worth value increasing each year. The balance sheet is a useful tool for financial planners because it provides a snapshot of the depletion of liquid assets over time: as money is spent from retirement accounts, the retirement account value on the balance sheet will decrease.

The columns identify the year of the financial plan and the age of John and Jane and the rows list account, asset, and liability values. A cash balance of approximately

$1,000 is used throughout the planning period to fulfil the financial planning software’s balancing feature. Due to rounding, the $1,000 may fluctuate slightly. The cash balance does not affect John and Jane’s financial independence. Table 4 below is a sample from the balance sheet found in Appendix B. 25

Table 4: Balance Sheet Sample

Financial Plan 2017 2018 2019 2020 2021 Age: 65/62 66/63 67/64 68/65 69/66 LIQUID ASSETS Cash Balance 993 1,001 1,000 1,001 1,000

Cash Deposits Checking/Savings 25,000 25,000 25,000 25,000 25,000

Investment Account 20,000 20,000 20,000 20,000 8,538 45,000 45,000 45,000 45,000 33,538

In 2020, John is turning 68 and Jane is turning 65. They have $25,000 of cash in their checking account and $20,000 of cash in their investment account giving them a subtotal of $45,000 cash. In 2021, they use some cash from their investment account so the value of cash in their investment account is $8,538.

Financial Independence Report

The financial independence report answers the question, “Do I have enough money to support myself for the rest of my life at my current standard of living?” The value that the financial independence report produces is the value of liquid money in future dollars that individuals will have at the end of their lives. This report is an important piece of the financial plan because if it produces a negative value, the individual needs to re-examine their living expenses and investment decisions. The financial independence value produced is the net worth at the end of the financial planning period minus the value of any illiquid assets, such as a house. 26

The tax projection report, cash flow statement, balance sheet, and financial independence report make up the financial plan. Each financial plan scenario will vary based on the defined benefit pension distribution method. By comparing the financial plan scenarios, a financial planner is able to see how a distribution method may effect an individual and his or her financial independence.

27

Chapter 5: Results and Conclusion

After researching and defining the case assumptions and inputs and determining the amount of the defined benefit plan distributions, the data was input into Exec Plan.

All financial plan reports were exported and are found in appendices B through E. The financial independence value given in each scenario is reported and discussed in the following sections.

Results

The financial independence value produced in each scenario is the value of liquid money in future dollars that John and Jane Doe have at the end of 2041. The financial independence value is written in future dollars in the last section of appendices B through

E and are summarized in the third column from the left in Table 5. According to the

Time Value of Money principle, the financial independence value can be discounted back to present using the rate of inflation because living expenses are raised by the inflation rate of 3% each year. The present value provided in the fourth column of Table

5 lists the present value, discounted by the rate of inflation from 2041 to 2017.

Table 5 lists the financial independence value for each scenario of the financial plan. The first column gives the scenario, the second column gives the distribution method used within the financial planning scenario, and the third and fourth columns give the amount of liquid assets John and Jane Doe have at the end of 2041 in both future and present value. The present value is helpful to John and Jane Doe because it provides them with their future financial independence according to the purchasing power of a dollar in 2017.

28

Table 5: Financial Independence Results

Future Present Scenario Defined Benefit Distribution Method Dollars Value 1 Lump Sum Distribution Assets available for liquidation: $334,088 $159,562

2 Partial Lump Sum and 50% Joint Survivor Annuity Assets available for liquidation: $136,470 $65,179

3 Single Life Annuity Assets available for liquidation: $198,959 $95,024

4 50% Joint and Survivor Annuity Assets available for liquidation: $180,209 $86,069

According to the results reported in Table 5, the best financial planning scenario for John and Jane Doe is Scenario 1 because they will have more assets available for liquidation at the end of 2041. John and Jane’s financial goal identified in case assumption 7 on page 15 states that John and Jane want to have enough money to support their current standard of living in retirement and the more money they have to leave to their heirs at the end of their lives, the better.

Discussion of Scenario 1: Lump Sum Distribution

When John Doe takes the lump sum distribution of his defined benefit pension in

2018, the lump sum amount is rolled into John’s IRA Rollover. Previous to the rollover,

John’s IRA Rollover account had $20,000. After the rollover, John’s account had

$354,088. In his IRA Rollover account, the money is invested and the value can grow.

John is required to withdraw money from his IRA Rollover according to required 29 minimum distribution rules defined by the Internal Revenue Service beginning in 2023.

In the other financial planning scenarios, John and Jane receive a steady flow of income, but the amount of income they receive from the defined benefit pension is not adjusted for inflation and it does not have the ability to grow over time (Time Warner Inc., 2015).

It is important to understand that this case study assumes that John’s IRA

Rollover is invested and that it appreciates 4% each year. If John’s IRA Rollover is not invested, or it is invested in riskier assets, it is possible that the ending value could be significantly different. It is also important to consider life expectancy. In this case study,

John was projected to live until age 84 and Jane until age 86; these ages were chosen based on the Social Security Administration’s life expectancy calculator (Social Security

Administration, “Retirement and survivors benefits,” 2016). If John or Jane live for fewer years, their assets available for liquidation may be higher: if they live for more years, their assets available for liquidation may be lower. Tax rules will change over the course of the financial planning period and as they change, the projections will alter.

Discussion of Results

In John and Jane Doe’s case, rolling the lump sum of the defined benefit pension directly into John’s IRA Rollover account is the most beneficial. Neither of the 50% joint and survivor annuities are optimal choices for John and Jane Doe because annuities offer a lower annual income than required minimum distributions. Since Jane is assumed to live only five years beyond John’s death, her small annuity amount can only be collected for a short period of time. Taking the single life annuity is a good option for John and

Jane considering their life expectancies. John and Jane Doe live modestly enough to retain some savings over the course of the plan because their income and savings are 30 higher than their annual expenses. Since Jane only lives five years without John’s defined benefit pension income, taking the full annuity amount over his lifespan gives them the most ending cash out of the annuity options. Defined benefit annuities do not receive cost of living adjustments or adjustments for inflation. Receiving $2,214 each month in 2017 is very different from receiving $2,214 each month in 2030 because inflation will naturally cause the purchasing power of the dollar to decrease over time.

It is likely that the lump sum is most beneficial to John and Jane Doe because of how John’s IRA Rollover functions. When John rolls his retirement plan into his IRA

Rollover, he does not pay tax; however, when he withdraws money from the account, it is taxed at the ordinary income rate (Internal Revenue Service, “Rollovers of retirement plan,” 2016). John’s IRA Rollover is subject to required minimum distributions. These rules, published by the Internal Revenue Service each year, declare what percentage of an individual’s retirement account must be withdrawn. Required minimum distribution rules take effect the year that an individual turns 70½. As John gets older and as the account value decreases, John is required to take less money out of the IRA Rollover annually. If

John needs cash for an emergency, he is able to withdraw more than the required minimum distribution amount. In general, receiving a flat annuity means that John and

Jane must rely on the annuity’s income level with no ability to withdraw excess money from the pension to cover extraneous cash needs. While they do have checking, savings, and IRAs, the amount of money in these accounts is not enough to support extraneous cash needs without the defined benefit pension. In the case of an emergency, rolling the defined benefit pension’s lump sum into an IRA Rollover is advantageous. 31

Rolling the defined benefit pension into John’s IRA Rollover is also beneficial because of the timing. John receives his lump sum at age 66 and it is invested in his IRA

Rollover where the value grows at an average annual rate of 4%. According to the required minimum distribution rules, he does not have to withdraw this invested money until age 70½ in 2023. Meanwhile, Jane is working and producing income for the household through 2020. Jane’s income in addition to their joint saving accounts allows them to live without withdrawing from John’s IRA Rollover thus letting the account value grow.

Significance

For John and Jane Doe, the lump sum was the best distribution method. However, this will not always be the case. It is important that financial advisors analyze each client and their personal situation thoroughly before making recommendations. The partial lump sum with a 50% joint and survivor annuity is likely to be most beneficial to clients who anticipate some cash needs early in retirement. In their case, they can take the lump sum to use it for something such as paying off their mortgage or funding their grandchild’s college education. This distribution method should only be considered if the clients can maintain their standard of living on the income of the reduced annuity. The single life annuity is likely to be most beneficial to pension recipients who have a long life expectancy since they are guaranteed an annuity for their lifetime. Defined benefit pension plans distribute funds as a 50% joint and survivor annuity by default. This scenario is likely to be most beneficial to pension recipients who have a spouse that is expected to live for many years after the first spouse’s death. The joint and survivor annuity guarantees that the surviving spouse receives some income. 32

Financial planners can use this research to better understand defined benefit pensions, how they work, and their impact on a client’s financial independence during retirement. Since very few companies currently offer defined benefit pensions, few financial advisors or financial scholars study them. However, as we see the baby boomer generation enter retirement, these plans will become more prevalent. It is imperative that financial advisors understand the type of pension their client has in addition to understanding each client’s unique needs. Having a thorough understanding of defined benefit pension plans and how they work will be a key element in helping the baby boomer generation plan for retirement.

33

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37

Appendix A: Definition of Terms

Annuity – a fixed sum of money that is paid to someone each year, typically for the rest of his or her life

Beta – a measure of risk; the higher the value of the beta, the riskier the investment; a beta with a value greater than one is considered to be riskier than the market, a beta with a value less than one is considered to be less risky than the market.

Broker or Investment Advisor – a financial advisor that is compensated by receiving commissions for selling investment or insurance products to clients

Capital – the sum of liquid money a person has

Capital Gains – when an investment has a higher value than it was purchased for, the profit is a capital gain

Defined Benefit Pension – a type of retirement plan in which an employer promises a specified pension payment in retirement to retirees

Defined Contribution Pension – a type of retirement plan in which an employer promises a specified contribution to the retirement plan, but does not guarantee pension payout amount to retirees

Dividends – a distribution of a portion of a company’s earnings to its shareholders

Equity – an asset class that is composed of stocks and Exchange Traded Funds; considered to be a high risk asset as it tends to correlate with the stock market

Financial independence – a value that measures the amount of liquid assets an individual has at the end of his or her lifetime

Fixed Income – an asset class that is characterized by generally paying a return on a fixed schedule, usually composed of bonds but may also include Exchange Traded Funds 38 and Certificates of Deposit; considered to be a low-risk asset because fixed income assets do not strongly correlate with the stock market

Four Percent Rule – a retiree should withdraw four percent of the value of all retirement accounts during his or her first year of retirement and adjust for inflation years afterwards

Future dollars – the value of a dollar at some point in the future; according to the Time

Value of Money principle, the value of a dollar today is different than the value of a dollar in the future because the dollar may be invested and inflation may change the value of the dollar over time.

Independent Financial Planner – a financial planner who does not sell any investments or insurance products and is compensated solely by a flat fee paid by the client

Individual Retirement Account (IRA) – a retirement account that an individual contributes to and manages on their own

Inflation – a general increase in prices over time

Liquidity – a measurement of how easily an asset can be converted to cash; examples of liquid assets are

Pension Administrator – a company or organization that is responsible for the investments and distributions of a pension

Portfolio – the group of assets that an individual owns such as: stocks, bonds, mutual funds, and real estate

Price Shocks – a sudden increase or decrease in stock prices

Purchasing Power – how valuable one dollar is relative to the price of goods and services in an economy

Risk Tolerance – the level of risk an investor is willing to take 39

Rollover – a transfer of funds from one retirement account to another; the rollover is a direct transfer that has no tax consequence

Time Value of Money – principal of finance that states the value of one dollar today is more than the value of one dollar in the future because the dollar today may be invested and inflation will naturally decrease the value of a dollar in the future

100 Subtract Age Rule – a general investment rule that advises individuals to subtract their age from 100 then rebalance their portfolio so that the number they got is equal to the percent of equity investments in their portfolio

60/40 Rule – a general investment rule that advises that 60% of the portfolio should be invested in equities and the other 40% in bonds

40

Appendix B: Financial Plan Scenario 1 – Lump Sum

Tax Projection Report

Years 2017 through 2021

Financial Plan 2017 2018 2019 2020 2021 Age: 65/62 66/63 67/64 68/65 69/66 Earned Income John's Salary 75,000 0 0 0 0 Jane's Salary 55,000 56,100 57,222 58,366 0 - - - - Jane's IRA 5,500 5,500 5,722 5,837 0 124,500 50,600 51,500 52,530 0 Interest/Dividends Investment Account 10 100 200 300 285 Additional Savings 112 231 249 266 137 Invest Mutual Funds 508 528 550 572 595

Invest Mutual Funds 1,523 1,585 1,649 1,716 1,786 2,152 2,444 2,648 2,854 2,804 Other

Txbl Social Sec 0 29,632 30,865 31,649 0 0 29,632 30,865 31,649 0

Net Capital Gain 620 759 799 838 2,718

Adj Gross Income 127,272 83,435 85,811 87,871 5,522

Deductions Medical 0 1,862 1,930 3,797 12,409 Charitable 50% 1,200 1,236 1,273 1,311 1,351 Real Estate Tax 2,182 2,226 2,270 2,316 2,362 DMV Fees 550 523 496 472 448 Home Mortg Int 7,271 7,128 6,980 6,826 6,665 Home Equity Line 676 641 602 562 521

Misc Expense Ded 0 371 365 365 2,055 Gross Deductions 11,879 13,986 13,917 15,648 25,811 41

Standard Deduction 13,950 14,400 14,850 16,600 17,100 Allowed Deductions 13,950 14,400 14,850 16,600 25,811 Pers Exemptions 8,100 8,400 8,600 8,900 9,200

Taxable Income 105,222 60,635 62,361 62,371 0

Fed Income Tax 17,659 7,865 8,082 8,039 0

Fed Tax Bracket-Ord Inc 25.0% 15.0% 15.0% 15.0% .0%

Years 2022 through 2026

Financial Plan 2022 2023 2024 2025 2026 Age: 70/67 71/68 72/69 73/70 74/71 Earned Income John's IRA R/O 0 18,151 18,832 19,536 20,265

Jane's IRA 0 0 0 0 4,096 0 18,151 18,832 19,536 24,361 Interest/Dividends Investment Account 85 0 0 0 0 Invest Mutual Funds 518 384 240 172 115

Invest Mutual Funds 1,554 1,151 721 515 346 2,157 1,534 961 686 462 Other

Txbl Social Sec 0 5,136 5,524 11,638 15,765 0 5,136 5,524 11,638 15,765

Net Capital Gain 1,955 3,004 3,338 1,908 1,678

Adj Gross Income 4,112 27,825 28,655 33,769 42,265

Deductions Medical 12,939 10,968 11,298 11,211 10,799 Charitable 50% 1,391 1,433 1,476 1,520 1,566 Real Estate Tax 2,409 2,457 2,506 2,557 2,608 42

DMV Fees 600 570 542 514 489 Home Mortg Int 6,498 6,323 6,141 5,952 5,754 Home Equity Line 476 430 381 330 277

Misc Expense Ded 2,126 1,695 1,724 1,668 1,545 Gross Deductions 26,439 23,877 24,068 23,752 23,038

Standard Deduction 17,700 18,200 18,800 19,300 19,900 Allowed Deductions 26,439 23,877 24,068 23,752 23,038 Pers Exemptions 9,400 9,700 10,000 10,300 10,600

Taxable Income 0 0 0 0 8,628

Fed Income Tax 0 0 0 0 683

Fed Tax Bracket-Ord Inc .0% .0% .0% .0% 10.0%

Years 2027 through 2031

Financial Plan 2027 2028 2029 2030 2031 Age: 75/72 76/73 77/74 78/75 79/76 Earned Income John's IRA R/O 21,019 21,799 22,498 23,327 41,727

Jane's IRA 4,250 4,409 4,573 4,744 4,920 25,269 26,208 27,071 28,071 46,647 Interest/Dividends Additional Savings 96 123 27 0 0 Invest Mutual Funds 120 125 81 6 0

Invest Mutual Funds 360 375 244 18 0 576 623 353 24 0 Other

Txbl Social Sec 15,810 17,304 19,373 20,306 35,097 15,810 17,304 19,373 20,306 35,097

Net Capital Gain 216 487 1,818 1,726 48

43

Adj Gross Income 41,872 44,622 48,614 50,126 81,792

Deductions Medical 11,289 11,478 11,557 11,899 9,240 Charitable 50% 1,613 1,661 1,711 1,762 1,815 Real Estate Tax 2,660 2,713 2,767 2,823 2,879 DMV Fees 600 570 542 514 489 Home Mortg Int 5,549 5,333 5,111 4,877 4,635 Home Equity Line 219 160 97 31 0

Misc Expense Ded 1,601 1,595 1,564 1,584 1,003 Gross Deductions 23,531 23,510 23,350 23,490 20,060

Standard Deduction 20,500 21,100 21,800 22,400 23,100 Allowed Deductions 23,531 23,510 23,350 23,490 23,100 Pers Exemptions 11,000 11,300 11,600 12,000 12,300

Taxable Income 7,341 9,812 13,665 14,636 46,392

Fed Income Tax 691 908 1,174 1,290 5,477

Fed Tax Bracket-Ord Inc 10.0% 10.0% 10.0% 10.0% 15.0%

Years 2032 through 2036

Financial Plan 2032 2033 2034 2035 2036 Age: 80/77 81/78 82/79 83/80 81 Earned Income John's IRA R/O 23,861 24,591 42,670 46,048 47,882

Jane's IRA 5,077 5,264 5,430 5,598 5,769 28,938 29,855 48,100 51,646 53,651 Interest/Dividends

Additional Savings 103 120 17 0 0 103 120 17 0 0 Other

Txbl Social Sec 20,634 22,177 37,845 41,175 43,367 44

20,634 22,177 37,845 41,175 43,367

Net Capital Gain 103 439 175 0 0

Adj Gross Income 49,778 52,591 86,137 92,821 97,018

Deductions Medical 12,964 13,221 10,420 10,323 10,491 Charitable 50% 1,870 1,926 1,983 2,043 2,104 Real Estate Tax 2,937 2,995 3,055 3,116 3,179 DMV Fees 500 475 451 429 407 Home Mortg Int 4,382 4,119 3,843 3,558 3,260

Misc Expense Ded 1,696 1,694 1,077 1,000 974 Gross Deductions 24,348 24,430 20,830 20,470 20,415

Standard Deduction 23,800 24,600 25,300 26,000 26,800 Allowed Deductions 24,348 24,600 25,300 26,000 26,800 Pers Exemptions 12,700 13,100 13,500 13,900 14,300

Taxable Income 12,730 14,891 47,337 52,921 55,918

Fed Income Tax 1,252 1,433 5,462 6,278 6,678

Fed Tax Bracket-Ord Inc 10.0% 10.0% 15.0% 15.0% 15.0%

Years 2037 through 2040

Financial Plan 2037 2038 2039 2040 Age: 82 83 84 85 Earned Income John's IRA R/O 44,548 35,121 36,323 37,660

Jane's IRA 5,944 6,120 6,298 6,435 50,492 41,241 42,621 44,095 Other

Txbl Social Sec 27,127 19,529 20,972 22,499 27,127 19,529 20,972 22,499 45

Adj Gross Income 77,619 60,770 63,593 66,594

Deductions Medical 2,692 4,691 4,731 4,764 Charitable 50% 2,167 2,232 2,299 2,368 Real Estate Tax 3,242 3,307 3,373 3,441 DMV Fees 387 368 349 332 Home Mortg Int 2,949 2,625 2,288 1,936

Misc Expense Ded 1,420 1,816 1,820 1,822 Gross Deductions 12,857 15,039 14,861 14,662

Standard Deduction 27,600 28,400 29,400 30,200 Allowed Deductions 27,600 28,400 29,400 30,200 Pers Exemptions 14,700 15,200 15,600 16,100

Taxable Income 35,319 17,170 18,593 20,294

Fed Income Tax 3,538 1,717 1,859 2,029

Fed Tax Bracket-Ord Inc 15.0% 10.0% 10.0% 10.0%

Cash Flow Statement

Years 2017 through 2021

Financial Plan 2017 2018 2019 2020 2021 Age: 65/62 66/63 67/64 68/65 69/66 BEGINNING OF YEAR Idle Cash On Hand 1,000 993 1,001 1,000 1,001

SOURCES OF CASH

Cash Income John's Salary 75,000 0 0 0 0 Jane's Salary 55,000 56,100 57,222 58,366 0 John's Soc Security 0 24,000 24,408 24,823 25,245 46

Jane's Soc Security 0 12,000 12,204 12,411 12,622

Interest+Dividends 10 100 200 300 285 130,010 92,200 94,034 95,901 38,152 Sale/Withdrawals Additional Savings 0 0 0 0 28,403

Investment Account 0 0 0 0 11,462 0 0 0 0 39,865

Total Cash Inflow 130,010 92,200 94,034 95,901 78,017

Tot Cash Available 131,010 93,193 95,035 96,900 79,018

USES OF CASH

Fully Tax Deductible Jane's IRA 5,500 5,500 5,722 5,837 0 Home Mortg Int 7,271 7,128 6,980 6,826 6,665

Home Equity Line 676 641 602 562 521 13,447 13,269 13,304 13,225 7,186 Partly Deductible John's Medicare B 1,608 1,656 1,706 1,757 1,810 Jane's Medicare B 0 0 0 1,757 1,810 Supplemental Ins. 6,800 7,004 7,214 7,431 7,653 Medicine & Drugs 1,000 1,030 1,061 1,093 1,126 Dentist 500 515 530 546 563 Charity Contrb-50% 1,200 1,236 1,273 1,311 1,351

Financial Plan Fee 2,000 2,040 2,081 2,122 2,165 13,108 13,481 13,865 16,017 16,477 Not Tax Deductible Auto Loan Interest 142 77 14 0 0 Groceries 10,000 10,300 10,609 10,927 11,255 Outside Meals 2,400 2,472 2,546 2,623 2,701 Clothing 1,200 1,236 1,273 1,311 1,351 Entertainment 2,000 2,060 2,122 2,185 2,251 Vacations 4,000 4,120 4,244 4,371 4,502 Gifts 3,000 3,090 3,183 3,278 3,377 47

Gas 2,400 2,472 2,546 2,623 2,701 Auto Repairs 500 515 530 546 563 Life Insurance 800 800 800 800 800 Property/Liability 680 700 721 743 765 Auto Insurance 2,000 2,060 2,122 2,185 2,251 Jane Disability Ins 950 950 950 950 0 Repair/Maintenance 200 206 212 219 225 Gardener 1,200 1,236 1,273 1,311 1,351 Utilities 3,600 3,708 3,819 3,934 4,052 Phones 2,100 2,163 2,228 2,295 2,364 Cable/Internet 1,200 1,236 1,273 1,311 1,351 Personal Care 1,000 1,030 1,061 1,093 1,126 Pets 1,200 1,236 1,273 1,311 1,351 Memberships 300 309 318 328 338 Lifestyle Increase 2,478 79 117 41 0

Miscellaneous 1,800 1,854 1,910 1,967 2,026 45,150 43,909 45,145 46,352 46,698 Taxes Paid Fed Tax Paid 17,659 7,865 8,082 8,039 0 FICA/Soc Sec Tax 9,946 4,292 4,377 4,465 0 Real Estate Tax 2,182 2,226 2,270 2,316 2,362

DMV Fees 550 523 496 472 448 30,337 14,905 15,226 15,291 2,810 Purchase/Deposits

Additional Savings 22,300 709 1,049 369 0 22,300 709 1,049 369 0 Liability Liquidation Home Mtg Principal 3,379 3,522 3,670 3,824 3,985 Auto Loan 1,589 1,654 996 0 0

Home Equity Line 707 742 781 821 862 5,675 5,918 5,447 4,645 4,847

Tot Cash Outflow 130,017 92,192 94,036 95,900 78,018 END OF YEAR Cash Balance 993 1,001 1,000 1,001 1,000

48

Years 2022 through 2026

Financial Plan 2022 2023 2024 2025 2026 Age: 70/67 71/68 72/69 73/70 74/71 BEGINNING OF YEAR Idle Cash On Hand 1,000 1,000 1,000 1,000 1,000

SOURCES OF CASH

Cash Income John's IRA R/O 0 18,151 18,832 19,536 20,265 Jane's IRA 0 0 0 0 4,096 John's Soc Security 25,674 26,111 26,554 27,006 27,465 Jane's Soc Security 12,837 13,055 13,277 30,000 30,510

Interest+Dividends 85 0 0 0 0 38,596 57,317 58,664 76,542 82,336 Sale/Withdrawals Invest Mutual Funds 20,027 30,667 31,302 15,466 12,460 Checking/Savings 25,000 0 0 0 0

Investment Account 8,538 0 0 0 0 53,565 30,667 31,302 15,466 12,460 Liab Incurred

Auto Loan 30,000 0 0 0 0 30,000 0 0 0 0

Total Cash Inflow 122,161 87,984 89,966 92,008 94,796

Tot Cash Available 123,161 88,983 90,966 93,008 95,796

USES OF CASH

Fully Tax Deductible Home Mortg Int 6,498 6,323 6,141 5,952 5,754

Home Equity Line 476 430 381 330 277 6,974 6,753 6,522 6,282 6,031 Partly Deductible 49

John's Medicare B 1,864 1,920 1,978 2,037 2,098 Jane's Medicare B 1,864 1,920 1,978 2,037 2,098 Supplemental Ins. 7,883 8,120 8,363 8,614 8,872 Medicine & Drugs 1,159 1,194 1,230 1,267 1,305 Dentist 580 597 615 633 652 Charity Contrb-50% 1,391 1,433 1,476 1,520 1,566

Financial Plan Fee 2,208 2,252 2,297 2,343 2,390 16,949 17,436 17,936 18,451 18,982 Not Tax Deductible Auto Loan Interest 1,058 1,171 883 581 262 Groceries 11,593 11,941 12,299 12,668 13,048 Outside Meals 2,782 2,866 2,952 3,040 3,131 Clothing 1,391 1,433 1,476 1,520 1,566 Entertainment 2,319 2,388 2,460 2,534 2,610 Vacations 4,637 4,776 4,919 5,067 5,219 Gifts 3,478 3,582 3,690 3,800 3,914 Gas 2,782 2,866 2,952 3,040 3,131 Auto Repairs 580 597 615 633 652 Life Insurance 800 0 0 0 0 Property/Liability 788 812 836 861 887 Auto Insurance 2,319 2,388 2,460 2,534 2,610 Repair/Maintenance 232 239 246 253 261 Gardener 1,391 1,433 1,476 1,520 1,566 Utilities 4,173 4,299 4,428 4,560 4,697 Phones 2,434 2,508 2,583 2,660 2,740 Cable/Internet 1,391 1,433 1,476 1,520 1,566 Personal Care 1,159 1,194 1,230 1,267 1,305 Pets 1,391 1,433 1,476 1,520 1,566 Memberships 348 358 369 380 391

Miscellaneous 2,087 2,149 2,214 2,280 2,349 49,133 49,864 51,037 52,240 53,471 Taxes Paid Fed Tax Paid 0 0 0 0 683 Real Estate Tax 2,409 2,457 2,506 2,557 2,608

DMV Fees 600 570 542 514 489 3,009 3,027 3,048 3,071 3,780 Purchase/Deposits 50

New Car 37,000 0 0 0 0 37,000 0 0 0 0 Liability Liquidation Home Mtg Principal 4,152 4,327 4,509 4,698 4,896 Auto Loan 4,037 5,623 5,911 6,213 6,532

Home Equity Line 907 953 1,002 1,053 1,106 9,096 10,903 11,422 11,964 12,534

Tot Cash Outflow 122,162 87,984 89,966 92,008 94,797 END OF YEAR Cash Balance 1,000 1,000 1,000 1,000 999

Years 2027 through 2031

Financial Plan 2027 2028 2029 2030 2031 Age: 75/72 76/73 77/74 78/75 79/76 BEGINNING OF YEAR Idle Cash On Hand 999 993 984 999 999

SOURCES OF CASH

Cash Income John's IRA R/O 21,019 21,799 22,498 23,327 41,727 Jane's IRA 4,250 4,409 4,573 4,744 4,920 John's Soc Security 27,932 28,407 28,890 29,381 29,880

Jane's Soc Security 31,029 31,556 32,093 32,638 33,193 84,230 86,171 88,053 90,090 109,720 Sale/Withdrawals Additional Savings 0 14,507 5,624 0 0

Invest Mutual Funds 0 0 9,588 15,529 1,213 0 14,507 15,212 15,529 1,213 Liab Incurred

Auto Loan 35,000 0 0 0 0 35,000 0 0 0 0 51

Total Cash Inflow 119,230 100,678 103,265 105,619 110,933

Tot Cash Available 120,228 101,671 104,249 106,618 111,933

USES OF CASH

Fully Tax Deductible Home Mortg Int 5,549 5,333 5,111 4,877 4,635

Home Equity Line 219 160 97 31 0 5,768 5,493 5,208 4,908 4,635 Partly Deductible John's Medicare B 2,161 2,226 2,293 2,361 2,432 Jane's Medicare B 2,161 2,226 2,292 2,361 2,432 Supplemental Ins. 9,139 9,413 9,695 9,986 10,286 Medicine & Drugs 1,344 1,384 1,426 1,469 1,513 Dentist 672 692 713 734 756 Charity Contrb-50% 1,613 1,661 1,711 1,762 1,815

Financial Plan Fee 2,438 2,487 2,536 2,587 2,639 19,527 20,089 20,666 21,261 21,873 Not Tax Deductible Auto Loan Interest 14 0 0 0 0 Auto Loan 1,234 1,366 1,030 677 306 Groceries 13,439 13,842 14,258 14,685 15,126 Outside Meals 3,225 3,322 3,422 3,524 3,630 Clothing 1,613 1,661 1,711 1,762 1,815 Entertainment 2,688 2,768 2,852 2,937 3,025 Vacations 5,376 5,537 5,703 5,874 6,050 Gifts 4,032 4,153 4,277 4,406 4,538 Gas 3,225 3,322 3,422 3,524 3,630 Auto Repairs 672 692 713 734 756 Property/Liability 914 941 970 999 1,029 Auto Insurance 2,688 2,768 2,852 2,937 3,025 Repair/Maintenance 269 277 285 294 303 Gardener 1,613 1,661 1,711 1,762 1,815 Utilities 4,838 4,983 5,133 5,287 5,445 Phones 2,822 2,907 2,994 3,084 3,176 Cable/Internet 1,613 1,661 1,711 1,762 1,815 52

Personal Care 1,344 1,384 1,426 1,469 1,513 Pets 1,613 1,661 1,711 1,762 1,815 Memberships 403 415 428 441 454 Lifestyle Increase 2,128 0 0 0 0

Miscellaneous 2,419 2,492 2,566 2,643 2,723 58,181 57,815 59,173 60,564 61,989 Taxes Paid Fed Tax Paid 691 908 1,174 1,290 5,477 Real Estate Tax 2,660 2,713 2,767 2,823 2,879

DMV Fees 600 570 542 514 489 3,951 4,191 4,483 4,628 8,844 Purchase/Deposits

Additional Savings 19,149 0 0 0 0 19,149 0 0 0 0 Liability Liquidation Home Mtg Principal 5,101 5,317 5,539 5,773 6,015 Auto Loan 1,684 0 0 0 0 Home Equity Line 1,164 1,223 1,286 1,236 0

Auto Loan 4,710 6,560 6,896 7,249 7,620 12,659 13,100 13,721 14,258 13,635

Tot Cash Outflow 119,235 100,687 103,250 105,618 110,977 END OF YEAR Cash Balance 993 984 999 999 956

Years 2032 through 2036

Financial Plan 2032 2033 2034 2035 2036 Age: 80/77 81/78 82/79 83/80 81 BEGINNING OF YEAR Idle Cash On Hand 956 993 980 960 950

SOURCES OF CASH

Cash Income 53

John's IRA R/O 23,861 24,591 42,670 46,048 47,882 Jane's IRA 5,077 5,264 5,430 5,598 5,769 John's Soc Security 30,388 30,905 31,430 31,964 32,508

Jane's Soc Security 33,757 34,331 34,915 35,508 36,112 93,083 95,091 114,445 119,119 122,271 Sale/Withdrawals

Additional Savings 0 18,099 3,465 0 0 0 18,099 3,465 0 0 Liab Incurred

Auto Loan 40,000 0 0 0 0 40,000 0 0 0 0

Total Cash Inflow 133,083 113,190 117,910 119,119 122,271

Tot Cash Available 134,039 114,183 118,890 120,079 123,220

USES OF CASH

Fully Tax Deductible

Home Mortg Int 4,382 4,119 3,843 3,558 3,260 4,382 4,119 3,843 3,558 3,260 Partly Deductible John's Medicare B 2,505 2,580 2,658 2,738 2,820 Jane's Medicare B 2,505 2,580 2,658 2,737 2,819 Supplemental Ins. 10,594 10,912 11,239 11,577 11,924 Medicine & Drugs 1,558 1,605 1,653 1,702 1,754 Dentist 779 802 826 851 877 Charity Contrb-50% 1,870 1,926 1,983 2,043 2,104

Financial Plan Fee 2,692 2,746 2,800 2,856 2,914 22,503 23,151 23,818 24,504 25,211 Not Tax Deductible Auto Loan Interest 1,411 1,561 1,176 774 350 Auto Loan 16 0 0 0 0 Groceries 15,580 16,047 16,528 17,024 17,535 Outside Meals 3,739 3,851 3,967 4,086 4,208 Clothing 1,870 1,926 1,983 2,043 2,104 54

Entertainment 3,116 3,209 3,306 3,405 3,507 Vacations 6,232 6,419 6,611 6,810 7,014 Gifts 4,674 4,814 4,959 5,107 5,261 Gas 3,739 3,851 2,000 2,060 2,122 Auto Repairs 779 802 826 450 464 Property/Liability 1,059 1,091 1,124 1,158 1,192 Auto Insurance 3,116 3,209 3,306 1,500 1,545 Repair/Maintenance 312 321 331 340 351 Gardener 1,870 1,926 1,983 2,043 2,104 Utilities 5,609 5,777 5,950 6,129 6,313 Phones 3,272 3,370 3,471 3,575 3,682 Cable/Internet 1,870 1,926 1,983 2,043 2,104 Personal Care 1,558 1,605 1,653 1,702 1,754 Pets 1,870 1,926 1,983 2,043 2,104 Memberships 467 481 496 511 526 Lifestyle Increase 2,290 0 0 0 0

Miscellaneous 2,804 2,888 2,975 3,064 3,156 67,251 67,001 66,612 65,867 67,396 Taxes Paid Fed Tax Paid 1,252 1,433 5,462 6,278 6,678 Real Estate Tax 2,937 2,995 3,055 3,116 3,179

DMV Fees 500 475 451 429 407 4,689 4,904 8,968 9,823 10,264 Purchase/Deposits

Additional Savings 20,606 0 0 0 0 20,606 0 0 0 0 Liability Liquidation Home Mtg Principal 6,268 6,531 6,807 7,092 7,390 Auto Loan 5,383 7,497 7,882 8,284 8,708

Auto Loan 1,965 0 0 0 0 13,616 14,028 14,689 15,376 16,098

Tot Cash Outflow 133,047 113,202 117,931 119,129 122,229 END OF YEAR Cash Balance 993 980 960 950 992

55

Years 2037 through 2040

Financial Plan 2037 2038 2039 2040 Age: 82 83 84 85 BEGINNING OF YEAR Idle Cash On Hand 992 968 988 987

SOURCES OF CASH

Cash Income John's IRA R/O 44,548 35,121 36,323 37,660 Jane's IRA 5,944 6,120 6,298 6,435

Jane's Soc Security 36,726 37,350 37,985 38,631 87,218 78,591 80,606 82,726

Total Cash Inflow 87,218 78,591 80,606 82,726

Tot Cash Available 88,209 79,559 81,594 83,713

USES OF CASH

Fully Tax Deductible

Home Mortg Int 2,949 2,625 2,288 1,936 2,949 2,625 2,288 1,936 Partly Deductible Jane's Medicare B 2,904 2,991 3,081 3,173 Supplemental Ins. 6,100 6,283 6,471 6,666 Medicine & Drugs 1,000 1,030 1,061 1,093 Dentist 450 464 477 492 Charity Contrb-50% 2,167 2,232 2,299 2,368

Financial Plan Fee 2,972 3,031 3,092 3,154 15,593 16,031 16,482 16,946 Not Tax Deductible Auto Loan Interest 19 0 0 0 Groceries 9,000 9,270 9,548 9,835 Outside Meals 2,200 2,266 2,334 2,404 Clothing 1,500 1,545 1,591 1,639 56

Entertainment 2,000 2,060 2,122 2,185 Vacations 3,500 3,605 3,713 3,825 Gifts 5,418 5,581 5,748 5,921 Gas 2,185 0 0 0 Auto Repairs 477 0 0 0 Property/Liability 1,228 1,265 1,303 1,342 Auto Insurance 1,591 0 0 0 Repair/Maintenance 361 372 383 395 Gardener 2,167 2,232 2,299 2,368 Utilities 6,502 6,697 6,898 7,105 Phones 3,793 3,907 4,024 4,145 Cable/Internet 2,167 2,232 2,299 2,368 Personal Care 1,806 1,860 1,916 1,974 Pets 2,167 0 0 0 Memberships 250 258 265 273

Miscellaneous 3,251 3,349 3,449 3,552 51,585 46,499 47,894 49,330 Taxes Paid Fed Tax Paid 3,538 1,717 1,859 2,029 Real Estate Tax 3,242 3,307 3,373 3,441

DMV Fees 387 368 349 332 7,167 5,392 5,582 5,802 Liability Liquidation Home Mtg Principal 7,701 8,025 8,362 8,714

Auto Loan 2,246 0 0 0 9,947 8,025 8,362 8,714

Tot Cash Outflow 87,241 78,572 80,607 82,728 END OF YEAR Cash Balance 968 988 987 985

Balance Sheet

Years 2017 through 2021

Financial Plan 2017 2018 2019 2020 2021 Age: 65/62 66/63 67/64 68/65 69/66 57

LIQUID ASSETS Cash Balance 993 1,001 1,000 1,001 1,000

Cash Deposits Checking/Savings 25,000 25,000 25,000 25,000 25,000

Investment Account 20,000 20,000 20,000 20,000 8,538 45,000 45,000 45,000 45,000 33,538 Stocks & Bonds Additional Savings 22,746 24,379 26,424 27,857 0

Invest Mutual Funds 104,076 108,317 112,732 117,326 122,108 126,822 132,696 139,156 145,183 122,108

Liquid Assets 172,814 178,697 185,155 191,184 156,646

NON-LIQUID ASSETS

Retirement Plans John's IRA R/O 20,800 411,167 427,614 444,719 462,508 Jane's IRA 62,920 71,157 79,954 89,222 92,791

John's DB 375,803 0 0 0 0 459,523 482,324 507,568 533,941 555,299 Personal Property

Residence 342,720 349,574 356,566 363,697 370,971 342,720 349,574 356,566 363,697 370,971

Non-liquid Assets 802,243 831,898 864,134 897,638 926,270

Total Assets 975,057 1,010,595 1,049,289 1,088,822 1,082,916

LIABILITIES

Mortgage Loans Residence 174,413 170,891 167,221 163,397 159,412

Home Equity Line 13,136 12,394 11,613 10,792 9,930 187,549 183,285 178,834 174,189 169,342 58

Notes Payable

Auto Loan 2,650 996 0 0 0 2,650 996 0 0 0

Total Liabilities 190,199 184,281 178,834 174,189 169,342

Net Worth 784,858 826,314 870,455 914,633 913,574

Years 2022 through 2026

Financial Plan 2022 2023 2024 2025 2026 Age: 70/67 71/68 72/69 73/70 74/71 LIQUID ASSETS Cash Balance 1,000 1,000 1,000 1,000 999

Stocks & Bonds

Invest Mutual Funds 106,241 78,654 49,282 35,194 23,661 106,241 78,654 49,282 35,194 23,661

Liquid Assets 107,241 79,654 50,282 36,194 24,660

NON-LIQUID ASSETS

Retirement Plans John's IRA R/O 481,008 482,097 482,549 482,315 481,343

Jane's IRA 96,503 100,363 104,378 108,553 108,799 577,511 582,460 586,927 590,868 590,142 Personal Property

Residence 378,391 385,958 393,678 401,551 409,582 378,391 385,958 393,678 401,551 409,582

Non-liquid Assets 955,902 968,418 980,605 992,419 999,724

Total Assets 1,063,143 1,048,072 1,030,887 1,028,613 1,024,384

59

LIABILITIES

Mortgage Loans Residence 155,260 150,933 146,424 141,726 136,830

Home Equity Line 9,023 8,070 7,068 6,015 4,909 164,283 159,003 153,492 147,741 141,739 Notes Payable

New Car 25,963 20,340 14,429 8,216 1,684 25,963 20,340 14,429 8,216 1,684

Total Liabilities 190,246 179,343 167,921 155,957 143,423

Net Worth 872,897 868,729 862,966 872,656 880,961 Years 2027 through 2031

Financial Plan 2027 2028 2029 2030 2031 Age: 75/72 76/73 77/74 78/75 79/76 LIQUID ASSETS Cash Balance 993 984 999 999 956

Stocks & Bonds Additional Savings 19,532 5,516 0 0 0

Invest Mutual Funds 24,625 25,629 16,695 1,213 0 44,157 31,145 16,695 1,213 0

Liquid Assets 45,151 32,129 17,693 2,213 956

NON-LIQUID ASSETS

Retirement Plans John's IRA R/O 479,578 476,962 473,542 469,157 446,196

Jane's IRA 108,901 108,848 108,629 108,230 107,639 588,479 585,810 582,171 577,387 553,835 Personal Property

Residence 417,774 426,129 434,652 443,345 452,212 60

417,774 426,129 434,652 443,345 452,212

Non-liquid Assets 1,006,253 1,011,939 1,016,823 1,020,732 1,006,047

Total Assets 1,051,404 1,044,068 1,034,516 1,022,945 1,007,003

LIABILITIES

Mortgage Loans Residence 131,729 126,412 120,873 115,100 109,085

Home Equity Line 3,745 2,522 1,236 0 0 135,474 128,934 122,109 115,100 109,085 Notes Payable

Auto Loan 30,290 23,730 16,834 9,585 1,965 30,290 23,730 16,834 9,585 1,965

Total Liabilities 165,764 152,664 138,943 124,685 111,050

Net Worth 885,640 891,404 895,573 898,260 895,953

Years 2032 through 2036

Financial Plan 2032 2033 2034 2035 2036 Age: 80/77 81/78 82/79 83/80 81 LIQUID ASSETS Cash Balance 993 980 960 950 992

Stocks & Bonds

Additional Savings 21,018 3,398 0 0 0 21,018 3,398 0 0 0

Liquid Assets 22,011 4,378 960 950 992

NON-LIQUID ASSETS

Retirement Plans 61

John's IRA R/O 440,183 433,199 407,857 378,123 345,366

Jane's IRA 106,868 105,879 104,684 103,273 101,635 547,051 539,078 512,541 481,396 447,001 Personal Property

Residence 461,256 470,481 479,891 489,489 499,278 461,256 470,481 479,891 489,489 499,278

Non-liquid Assets 1,008,307 1,009,559 992,432 970,885 946,279

Total Assets 1,030,318 1,013,937 993,392 971,835 947,271

LIABILITIES

Mortgage Loans

Residence 102,817 96,286 89,479 82,387 74,997 102,817 96,286 89,479 82,387 74,997 Notes Payable

Auto Loan 34,617 27,120 19,238 10,954 2,246 34,617 27,120 19,238 10,954 2,246

Total Liabilities 137,434 123,406 108,717 93,341 77,243

Net Worth 892,884 890,531 884,675 878,494 870,028

Years 2037 through 2040

Financial Plan 2037 2038 2039 2040 Age: 82 83 84 85 LIQUID ASSETS Cash Balance 968 988 987 985

Liquid Assets 968 988 987 985

NON-LIQUID ASSETS 62

Retirement Plans John's IRA R/O 314,633 292,097 267,458 240,496

Jane's IRA 99,756 97,626 95,233 92,607 414,389 389,723 362,691 333,103 Personal Property

Residence 509,264 519,449 529,838 540,435 509,264 519,449 529,838 540,435

Non-liquid Assets 923,653 909,172 892,529 873,538

Total Assets 924,621 910,160 893,516 874,523

LIABILITIES

Mortgage Loans

Residence 67,296 59,271 50,909 42,195 67,296 59,271 50,909 42,195

Total Liabilities 67,296 59,271 50,909 42,195

Net Worth 857,325 850,889 842,607 832,328

Financial Independence Report

At the end of 2041, you will be in a sound financial position. You will not have a deficit and your assets available for liquidation will be worth $334,088, which will be available as an emergency reserve. Assets that are considered available for liquidation are liquid assets such as cash accounts, mutual funds, and retirement accounts.

Inflation will average 3% over the course of the plan. Your projected investments will appreciate at an average rate of 3.60%.

63

Appendix C: Financial Plan Scenario 2 – Partial Lump Sum & 50% Joint and

Survivor Annuity

Tax Projection Report

Years 2017 through 2021

Financial Plan 2017 2018 2019 2020 2021 Age: 65/62 66/63 67/64 68/65 69/66 Earned Income John's Salary 75,000 0 0 0 0 John's DB 0 67,822 19,164 19,164 19,164 Jane's Salary 55,000 56,100 57,222 58,366 0 - - - - Jane's IRA 5,500 5,500 5,722 5,837 0 124,500 118,422 70,664 71,694 19,164 Interest/Dividends Investment Account 10 100 200 300 400 Additional Savings 112 468 805 990 1,002 Invest Mutual Funds 508 528 550 572 595

Invest Mutual Funds 1,523 1,585 1,649 1,716 1,786 2,152 2,681 3,204 3,578 3,784 Other

Txbl Social Sec 0 30,600 31,120 31,649 6,319 0 30,600 31,120 31,649 6,319

Net Capital Gain 620 996 1,355 1,562 2,494

Adj Gross Income 127,272 152,699 106,343 108,483 31,761

Deductions Medical 0 0 0 1,735 9,785 Charitable 50% 1,200 1,236 1,273 1,311 1,351 Real Estate Tax 2,182 2,226 2,270 2,316 2,362 DMV Fees 550 523 496 472 448 Home Mortg Int 7,271 7,128 6,980 6,826 6,665 Home Equity Line 676 641 602 562 521

Misc Expense Ded 0 0 0 0 1,530 Gross Deductions 11,879 11,753 11,622 13,222 22,662 64

Standard Deduction 13,950 14,400 14,850 16,600 17,100 Allowed Deductions 13,950 14,400 14,850 16,600 22,662 Pers Exemptions 8,100 8,400 8,600 8,900 9,200

Taxable Income 105,222 129,899 82,893 82,983 0

Fed Income Tax 17,659 23,098 10,995 10,914 0

Fed Tax Bracket-Ord Inc 25.0% 25.0% 15.0% 15.0% .0%

Years 2022 through 2026

Financial Plan 2022 2023 2024 2025 2026 Age: 70/67 71/68 72/69 73/70 74/71 Earned Income John's IRA R/O 0 955 991 1,028 1,066 John's DB 19,164 19,164 19,164 19,164 19,164

Jane's IRA 0 0 0 0 4,096 19,164 20,119 20,155 20,192 24,326 Interest/Dividends Investment Account 400 400 400 332 137 Additional Savings 769 488 218 39 0 Invest Mutual Funds 620 645 671 699 727

Invest Mutual Funds 1,859 1,935 2,014 2,096 2,181 3,648 3,468 3,303 3,165 3,045 Other

Txbl Social Sec 7,402 8,304 8,954 14,221 17,123 7,402 8,304 8,954 14,221 17,123

Net Capital Gain 3,582 3,541 4,101 1,812 727

Adj Gross Income 33,796 35,432 36,513 39,391 45,221

Deductions Medical 9,971 10,207 10,512 10,649 10,504 Charitable 50% 1,391 1,433 1,476 1,520 1,566 Real Estate Tax 2,409 2,457 2,506 2,557 2,608 65

DMV Fees 600 570 542 514 489 Home Mortg Int 6,498 6,323 6,141 5,952 5,754 Home Equity Line 476 430 381 330 277

Misc Expense Ded 1,532 1,543 1,567 1,555 1,486 Gross Deductions 22,877 22,964 23,125 23,077 22,683

Standard Deduction 17,700 18,200 18,800 19,300 19,900 Allowed Deductions 22,877 22,964 23,125 23,077 22,683 Pers Exemptions 9,400 9,700 10,000 10,300 10,600

Taxable Income 1,519 2,768 3,387 6,014 11,938

Fed Income Tax 0 0 0 346 1,048

Fed Tax Bracket-Ord Inc .0% .0% .0% 10.0% 10.0%

Years 2027 through 2031

Financial Plan 2027 2028 2029 2030 2031 Age: 75/72 76/73 77/74 78/75 79/76 Earned Income John's IRA R/O 1,106 1,147 1,184 1,227 1,266 John's DB 19,164 19,164 19,164 19,164 19,164

Jane's IRA 4,250 4,409 4,573 4,744 4,920 24,520 24,720 24,921 25,135 25,350 Interest/Dividends Investment Account 10 10 5 0 0 Additional Savings 91 104 13 0 0 Invest Mutual Funds 757 788 820 815 753

Invest Mutual Funds 2,270 2,363 2,459 2,444 2,260 3,128 3,264 3,297 3,258 3,013 Other

Txbl Social Sec 17,880 18,875 19,320 20,920 23,130 17,880 18,875 19,320 20,920 23,130

Net Capital Gain 848 1,181 962 2,151 4,253

Adj Gross Income 46,375 48,040 48,500 51,464 55,746 66

Deductions Medical 10,839 11,137 11,569 11,765 11,844 Charitable 50% 1,613 1,661 1,711 1,762 1,815 Real Estate Tax 2,660 2,713 2,767 2,823 2,879 DMV Fees 600 570 542 514 489 Home Mortg Int 5,549 5,333 5,111 4,877 4,635 Home Equity Line 219 160 97 31 0

Misc Expense Ded 1,510 1,526 1,566 1,558 1,524 Gross Deductions 22,990 23,100 23,363 23,330 23,186

Standard Deduction 20,500 21,100 21,800 22,400 23,100 Allowed Deductions 22,990 23,100 23,363 23,330 23,186 Pers Exemptions 11,000 11,300 11,600 12,000 12,300

Taxable Income 12,386 13,640 13,536 16,134 20,260

Fed Income Tax 1,069 1,157 1,174 1,317 1,525

Fed Tax Bracket-Ord Inc 10.0% 10.0% 10.0% 10.0% 10.0%

Years 2032 through 2036

Financial Plan 2032 2033 2034 2035 2036 Age: 80/77 81/78 82/79 83/80 81 Earned Income John's IRA R/O 1,305 1,345 1,385 1,427 1,468 John's DB 19,164 19,164 19,164 19,164 19,164

Jane's IRA 5,077 5,264 5,430 5,598 5,769 25,546 25,773 25,979 26,189 26,401 Interest/Dividends Additional Savings 88 88 0 0 0 Invest Mutual Funds 784 797 719 644 559

Invest Mutual Funds 2,352 2,391 2,158 1,932 1,676 3,224 3,276 2,878 2,576 2,235 Other

Txbl Social Sec 21,058 22,744 26,057 26,400 27,175 21,058 22,744 26,057 26,400 27,175 67

Net Capital Gain 872 2,032 5,567 5,499 5,966

Adj Gross Income 50,700 53,825 60,480 60,664 61,778

Deductions Medical 12,871 13,097 12,986 13,539 14,015 Charitable 50% 1,870 1,926 1,983 2,043 2,104 Real Estate Tax 2,937 2,995 3,055 3,116 3,179 DMV Fees 500 475 451 429 407 Home Mortg Int 4,382 4,119 3,843 3,558 3,260

Misc Expense Ded 1,678 1,670 1,590 1,643 1,678 Gross Deductions 24,238 24,282 23,909 24,328 24,643

Standard Deduction 23,800 24,600 25,300 26,000 26,800 Allowed Deductions 24,238 24,600 25,300 26,000 26,800 Pers Exemptions 12,700 13,100 13,500 13,900 14,300

Taxable Income 13,762 16,125 21,680 20,764 20,678

Fed Income Tax 1,202 1,321 1,539 1,462 1,415

Fed Tax Bracket-Ord Inc 10.0% 10.0% 10.0% 10.0% 10.0%

Years 2037 through 2040

Financial Plan 2037 2038 2039 2040 Age: 82 83 84 85 Earned Income John's IRA R/O 1,500 1,531 1,561 1,590 John's DB 9,576 9,576 9,576 9,576

Jane's IRA 5,944 6,120 6,298 6,435 17,020 17,227 17,435 17,601 Interest/Dividends Invest Mutual Funds 430 334 229 114

Invest Mutual Funds 1,289 1,002 688 343 1,718 1,336 917 457 Other 68

Txbl Social Sec 7,060 5,609 5,136 4,552 7,060 5,609 5,136 4,552

Net Capital Gain 8,146 5,980 4,928 3,731

Adj Gross Income 33,944 30,152 28,416 26,342

Deductions Medical 7,060 7,752 8,249 8,789 Charitable 50% 2,167 2,232 2,299 2,368 Real Estate Tax 3,242 3,307 3,373 3,441 DMV Fees 387 368 349 332 Home Mortg Int 2,949 2,625 2,288 1,936

Misc Expense Ded 2,293 2,428 2,524 2,627 Gross Deductions 18,098 18,713 19,083 19,493

Standard Deduction 27,600 28,400 29,400 30,200 Allowed Deductions 27,600 28,400 29,400 30,200 Pers Exemptions 14,700 15,200 15,600 16,100

Fed Income Tax 0 0 0 0

Fed Tax Bracket-Ord Inc .0% .0% .0% .0%

Cash Flow Statement

Years 2017 through 2021

Financial Plan 2017 2018 2019 2020 2021 Age: 65/62 66/63 67/64 68/65 69/66 BEGINNING OF YEAR Idle Cash On Hand 1,000 993 996 1,020 1,019

SOURCES OF CASH

Cash Income John's Salary 75,000 0 0 0 0 John's DB 0 67,822 19,164 19,164 19,164 69

Jane's Salary 55,000 56,100 57,222 58,366 0 John's Soc Security 0 24,000 24,408 24,823 25,245 Jane's Soc Security 0 12,000 12,204 12,411 12,622

Interest+Dividends 10 100 200 300 400 130,010 160,022 113,198 115,065 57,431 Sale/Withdrawals

Additional Savings 0 0 0 0 20,567 0 0 0 0 20,567

Total Cash Inflow 130,010 160,022 113,198 115,065 77,998

Tot Cash Available 131,010 161,015 114,194 116,084 79,017

USES OF CASH

Fully Tax Deductible Jane's IRA 5,500 5,500 5,722 5,837 0 Home Mortg Int 7,271 7,128 6,980 6,826 6,665

Home Equity Line 676 641 602 562 521 13,447 13,269 13,304 13,225 7,186 Partly Deductible John's Medicare B 1,608 1,656 1,706 1,757 1,810 Jane's Medicare B 0 0 0 1,757 1,810 Supplemental Ins. 6,800 7,004 7,214 7,431 7,653 Medicine & Drugs 1,000 1,030 1,061 1,093 1,126 Dentist 500 515 530 546 563 Charity Contrb-50% 1,200 1,236 1,273 1,311 1,351

Financial Plan Fee 2,000 2,040 2,081 2,122 2,165 13,108 13,481 13,865 16,017 16,477 Not Tax Deductible Auto Loan Interest 142 77 14 0 0 Groceries 10,000 10,300 10,609 10,927 11,255 Outside Meals 2,400 2,472 2,546 2,623 2,701 Clothing 1,200 1,236 1,273 1,311 1,351 Entertainment 2,000 2,060 2,122 2,185 2,251 Vacations 4,000 4,120 4,244 4,371 4,502 70

Gifts 3,000 3,090 3,183 3,278 3,377 Gas 2,400 2,472 2,546 2,623 2,701 Auto Repairs 500 515 530 546 563 Life Insurance 800 800 800 800 800 Property/Liability 680 700 721 743 765 Auto Insurance 2,000 2,060 2,122 2,185 2,251 Jane Disability Ins 950 950 950 950 0 Repair/Maintenance 200 206 212 219 225 Gardener 1,200 1,236 1,273 1,311 1,351 Utilities 3,600 3,708 3,819 3,934 4,052 Phones 2,100 2,163 2,228 2,295 2,364 Cable/Internet 1,200 1,236 1,273 1,311 1,351 Personal Care 1,000 1,030 1,061 1,093 1,126 Pets 1,200 1,236 1,273 1,311 1,351 Memberships 300 309 318 328 338 Lifestyle Increase 2,478 5,338 1,739 1,670 0

Miscellaneous 1,800 1,854 1,910 1,967 2,026 45,150 49,168 46,767 47,981 46,698 Taxes Paid Fed Tax Paid 17,659 23,098 10,995 10,914 0 FICA/Soc Sec Tax 9,946 4,292 4,377 4,465 0 Real Estate Tax 2,182 2,226 2,270 2,316 2,362

DMV Fees 550 523 496 472 448 30,337 30,138 18,139 18,166 2,810 Purchase/Deposits

Additional Savings 22,300 48,044 15,653 15,031 0 22,300 48,044 15,653 15,031 0 Liability Liquidation Home Mtg Principal 3,379 3,522 3,670 3,824 3,985 Auto Loan 1,589 1,654 996 0 0

Home Equity Line 707 742 781 821 862 5,675 5,918 5,447 4,645 4,847

Tot Cash Outflow 130,017 160,019 113,175 115,065 78,018 END OF YEAR Cash Balance 993 996 1,020 1,019 1,000

71

Years 2022 through 2026

Financial Plan 2022 2023 2024 2025 2026 Age: 70/67 71/68 72/69 73/70 74/71 BEGINNING OF YEAR Idle Cash On Hand 1,000 1,000 1,000 1,000 1,001

SOURCES OF CASH

Cash Income John's IRA R/O 0 955 991 1,028 1,066 John's DB 19,164 19,164 19,164 19,164 19,164 Jane's IRA 0 0 0 0 4,096 John's Soc Security 25,674 26,111 26,554 27,006 27,465 Jane's Soc Security 12,837 13,055 13,277 30,000 30,510

Interest+Dividends 400 400 400 332 137 58,075 59,685 60,387 77,530 82,438 Sale/Withdrawals Additional Savings 34,087 28,299 29,578 8,063 0

Investment Account 0 0 0 6,763 12,749 34,087 28,299 29,578 14,826 12,749 Liab Incurred

Auto Loan 30,000 0 0 0 0 30,000 0 0 0 0

Total Cash Inflow 122,162 87,984 89,965 92,356 95,187

Tot Cash Available 123,162 88,984 90,965 93,355 96,188

USES OF CASH

Fully Tax Deductible Home Mortg Int 6,498 6,323 6,141 5,952 5,754

Home Equity Line 476 430 381 330 277 6,974 6,753 6,522 6,282 6,031 Partly Deductible 72

John's Medicare B 1,864 1,920 1,978 2,037 2,098 Jane's Medicare B 1,864 1,920 1,978 2,037 2,098 Supplemental Ins. 7,883 8,120 8,363 8,614 8,872 Medicine & Drugs 1,159 1,194 1,230 1,267 1,305 Dentist 580 597 615 633 652 Charity Contrb-50% 1,391 1,433 1,476 1,520 1,566

Financial Plan Fee 2,208 2,252 2,297 2,343 2,390 16,949 17,436 17,936 18,451 18,982 Not Tax Deductible Auto Loan Interest 1,058 1,171 883 581 262 Groceries 11,593 11,941 12,299 12,668 13,048 Outside Meals 2,782 2,866 2,952 3,040 3,131 Clothing 1,391 1,433 1,476 1,520 1,566 Entertainment 2,319 2,388 2,460 2,534 2,610 Vacations 4,637 4,776 4,919 5,067 5,219 Gifts 3,478 3,582 3,690 3,800 3,914 Gas 2,782 2,866 2,952 3,040 3,131 Auto Repairs 580 597 615 633 652 Life Insurance 800 0 0 0 0 Property/Liability 788 812 836 861 887 Auto Insurance 2,319 2,388 2,460 2,534 2,610 Repair/Maintenance 232 239 246 253 261 Gardener 1,391 1,433 1,476 1,520 1,566 Utilities 4,173 4,299 4,428 4,560 4,697 Phones 2,434 2,508 2,583 2,660 2,740 Cable/Internet 1,391 1,433 1,476 1,520 1,566 Personal Care 1,159 1,194 1,230 1,267 1,305 Pets 1,391 1,433 1,476 1,520 1,566 Memberships 348 358 369 380 391

Miscellaneous 2,087 2,149 2,214 2,280 2,349 49,133 49,864 51,037 52,240 53,471 Taxes Paid Fed Tax Paid 0 0 0 346 1,048 Real Estate Tax 2,409 2,457 2,506 2,557 2,608

DMV Fees 600 570 542 514 489 3,009 3,027 3,048 3,417 4,145 Purchase/Deposits 73

New Car 37,000 0 0 0 0 37,000 0 0 0 0 Liability Liquidation Home Mtg Principal 4,152 4,327 4,509 4,698 4,896 Auto Loan 4,037 5,623 5,911 6,213 6,532

Home Equity Line 907 953 1,002 1,053 1,106 9,096 10,903 11,422 11,964 12,534

Tot Cash Outflow 122,162 87,984 89,966 92,355 95,162 END OF YEAR Cash Balance 1,000 1,000 1,000 1,001 1,026

Years 2027 through 2031

Financial Plan 2027 2028 2029 2030 2031 Age: 75/72 76/73 77/74 78/75 79/76 BEGINNING OF YEAR Idle Cash On Hand 1,026 993 980 989 998

SOURCES OF CASH

Cash Income John's IRA R/O 1,106 1,147 1,184 1,227 1,266 John's DB 19,164 19,164 19,164 19,164 19,164 Jane's IRA 4,250 4,409 4,573 4,744 4,920 John's Soc Security 27,932 28,407 28,890 29,381 29,880 Jane's Soc Security 31,029 31,556 32,093 32,638 33,193

Interest+Dividends 10 10 5 0 0 83,491 84,693 85,908 87,154 88,423 Sale/Withdrawals Additional Savings 0 16,230 2,771 0 0 Invest Mutual Funds 0 0 0 7,593 18,599 Checking/Savings 0 0 14,093 10,907 0

Investment Account 0 0 488 0 0 0 16,230 17,352 18,500 18,599 74

Liab Incurred

Auto Loan 35,000 0 0 0 0 35,000 0 0 0 0

Total Cash Inflow 118,491 100,923 103,260 105,654 107,022

Tot Cash Available 119,516 101,916 104,240 106,643 108,020

USES OF CASH

Fully Tax Deductible Home Mortg Int 5,549 5,333 5,111 4,877 4,635

Home Equity Line 219 160 97 31 0 5,768 5,493 5,208 4,908 4,635 Partly Deductible John's Medicare B 2,161 2,226 2,293 2,361 2,432 Jane's Medicare B 2,161 2,226 2,292 2,361 2,432 Supplemental Ins. 9,139 9,413 9,695 9,986 10,286 Medicine & Drugs 1,344 1,384 1,426 1,469 1,513 Dentist 672 692 713 734 756 Charity Contrb-50% 1,613 1,661 1,711 1,762 1,815

Financial Plan Fee 2,438 2,487 2,536 2,587 2,639 19,527 20,089 20,666 21,261 21,873 Not Tax Deductible Auto Loan Interest 14 0 0 0 0 Auto Loan 1,234 1,366 1,030 677 306 Groceries 13,439 13,842 14,258 14,685 15,126 Outside Meals 3,225 3,322 3,422 3,524 3,630 Clothing 1,613 1,661 1,711 1,762 1,815 Entertainment 2,688 2,768 2,852 2,937 3,025 Vacations 5,376 5,537 5,703 5,874 6,050 Gifts 4,032 4,153 4,277 4,406 4,538 Gas 3,225 3,322 3,422 3,524 3,630 Auto Repairs 672 692 713 734 756 Property/Liability 914 941 970 999 1,029 Auto Insurance 2,688 2,768 2,852 2,937 3,025 Repair/Maintenance 269 277 285 294 303 75

Gardener 1,613 1,661 1,711 1,762 1,815 Utilities 4,838 4,983 5,133 5,287 5,445 Phones 2,822 2,907 2,994 3,084 3,176 Cable/Internet 1,613 1,661 1,711 1,762 1,815 Personal Care 1,344 1,384 1,426 1,469 1,513 Pets 1,613 1,661 1,711 1,762 1,815 Memberships 403 415 428 441 454 Lifestyle Increase 2,019 0 0 0 0

Miscellaneous 2,419 2,492 2,566 2,643 2,723 58,072 57,815 59,173 60,564 61,989 Taxes Paid Fed Tax Paid 1,069 1,157 1,174 1,317 1,525 Real Estate Tax 2,660 2,713 2,767 2,823 2,879

DMV Fees 600 570 542 514 489 4,329 4,440 4,483 4,654 4,893 Purchase/Deposits

Additional Savings 18,168 0 0 0 0 18,168 0 0 0 0 Liability Liquidation Home Mtg Principal 5,101 5,317 5,539 5,773 6,015 Auto Loan 1,684 0 0 0 0 Home Equity Line 1,164 1,223 1,286 1,236 0

Auto Loan 4,710 6,560 6,896 7,249 7,620 12,659 13,100 13,721 14,258 13,635

Tot Cash Outflow 118,523 100,936 103,251 105,645 107,026 END OF YEAR Cash Balance 993 980 989 998 995

Years 2032 through 2036

Financial Plan 2032 2033 2034 2035 2036 Age: 80/77 81/78 82/79 83/80 81 BEGINNING OF YEAR Idle Cash On Hand 995 994 999 995 995

76

SOURCES OF CASH

Cash Income John's IRA R/O 1,305 1,345 1,385 1,427 1,468 John's DB 19,164 19,164 19,164 19,164 19,164 Jane's IRA 5,077 5,264 5,430 5,598 5,769 John's Soc Security 30,388 30,905 31,430 31,964 32,508

Jane's Soc Security 33,757 34,331 34,915 35,508 36,112 89,691 91,009 92,324 93,662 95,021 Sale/Withdrawals Additional Savings 0 18,339 0 0 0

Invest Mutual Funds 0 3,747 21,680 20,651 21,944 0 22,086 21,680 20,651 21,944 Liab Incurred

Auto Loan 40,000 0 0 0 0 40,000 0 0 0 0

Total Cash Inflow 129,691 113,095 114,004 114,313 116,965

Tot Cash Available 130,686 114,089 115,003 115,308 117,960

USES OF CASH

Fully Tax Deductible

Home Mortg Int 4,382 4,119 3,843 3,558 3,260 4,382 4,119 3,843 3,558 3,260 Partly Deductible John's Medicare B 2,505 2,580 2,658 2,738 2,820 Jane's Medicare B 2,505 2,580 2,658 2,737 2,819 Supplemental Ins. 10,594 10,912 11,239 11,577 11,924 Medicine & Drugs 1,558 1,605 1,653 1,702 1,754 Dentist 779 802 826 851 877 Charity Contrb-50% 1,870 1,926 1,983 2,043 2,104

Financial Plan Fee 2,692 2,746 2,800 2,856 2,914 22,503 23,151 23,818 24,504 25,211 77

Not Tax Deductible Auto Loan Interest 1,411 1,561 1,176 774 350 Auto Loan 16 0 0 0 0 Groceries 15,580 16,047 16,528 17,024 17,535 Outside Meals 3,739 3,851 3,967 4,086 4,208 Clothing 1,870 1,926 1,983 2,043 2,104 Entertainment 3,116 3,209 3,306 3,405 3,507 Vacations 6,232 6,419 6,611 6,810 7,014 Gifts 4,674 4,814 4,959 5,107 5,261 Gas 3,739 3,851 2,000 2,060 2,122 Auto Repairs 779 802 826 450 464 Property/Liability 1,059 1,091 1,124 1,158 1,192 Auto Insurance 3,116 3,209 3,306 1,500 1,545 Repair/Maintenance 312 321 331 340 351 Gardener 1,870 1,926 1,983 2,043 2,104 Utilities 5,609 5,777 5,950 6,129 6,313 Phones 3,272 3,370 3,471 3,575 3,682 Cable/Internet 1,870 1,926 1,983 2,043 2,104 Personal Care 1,558 1,605 1,653 1,702 1,754 Pets 1,870 1,926 1,983 2,043 2,104 Memberships 467 481 496 511 526 Lifestyle Increase 1,959 0 0 0 0

Miscellaneous 2,804 2,888 2,975 3,064 3,156 66,920 67,001 66,612 65,867 67,396 Taxes Paid Fed Tax Paid 1,202 1,321 1,539 1,462 1,415 Real Estate Tax 2,937 2,995 3,055 3,116 3,179

DMV Fees 500 475 451 429 407 4,638 4,791 5,046 5,007 5,001 Purchase/Deposits

Additional Savings 17,633 0 0 0 0 17,633 0 0 0 0 Liability Liquidation Home Mtg Principal 6,268 6,531 6,807 7,092 7,390 Auto Loan 5,383 7,497 7,882 8,284 8,708

Auto Loan 1,965 0 0 0 0 78

13,616 14,028 14,689 15,376 16,098

Tot Cash Outflow 129,692 113,090 114,008 114,313 116,966 END OF YEAR Cash Balance 994 999 995 995 993

Years 2037 through 2040

Financial Plan 2037 2038 2039 2040 Age: 82 83 84 85 BEGINNING OF YEAR Idle Cash On Hand 993 1,000 1,000 1,000

SOURCES OF CASH

Cash Income John's IRA R/O 1,500 1,531 1,561 1,590 John's DB 9,576 9,576 9,576 9,576 Jane's IRA 5,944 6,120 6,298 6,435

Jane's Soc Security 36,726 37,350 37,985 38,631 53,746 54,577 55,420 56,232 Sale/Withdrawals

Invest Mutual Funds 29,964 22,278 23,327 24,467 29,964 22,278 23,327 24,467

Total Cash Inflow 83,710 76,855 78,747 80,699

Tot Cash Available 84,703 77,855 79,748 81,699

USES OF CASH

Fully Tax Deductible

Home Mortg Int 2,949 2,625 2,288 1,936 2,949 2,625 2,288 1,936 Partly Deductible Jane's Medicare B 2,904 2,991 3,081 3,173 79

Supplemental Ins. 6,100 6,283 6,471 6,666 Medicine & Drugs 1,000 1,030 1,061 1,093 Dentist 450 464 477 492 Charity Contrb-50% 2,167 2,232 2,299 2,368

Financial Plan Fee 2,972 3,031 3,092 3,154 15,593 16,031 16,482 16,946 Not Tax Deductible Auto Loan Interest 19 0 0 0 Groceries 9,000 9,270 9,548 9,835 Outside Meals 2,200 2,266 2,334 2,404 Clothing 1,500 1,545 1,591 1,639 Entertainment 2,000 2,060 2,122 2,185 Vacations 3,500 3,605 3,713 3,825 Gifts 5,418 5,581 5,748 5,921 Gas 2,185 0 0 0 Auto Repairs 477 0 0 0 Property/Liability 1,228 1,265 1,303 1,342 Auto Insurance 1,591 0 0 0 Repair/Maintenance 361 372 383 395 Gardener 2,167 2,232 2,299 2,368 Utilities 6,502 6,697 6,898 7,105 Phones 3,793 3,907 4,024 4,145 Cable/Internet 2,167 2,232 2,299 2,368 Personal Care 1,806 1,860 1,916 1,974 Pets 2,167 0 0 0 Memberships 250 258 265 273

Miscellaneous 3,251 3,349 3,449 3,552 51,585 46,499 47,894 49,330 Taxes Paid Real Estate Tax 3,242 3,307 3,373 3,441

DMV Fees 387 368 349 332 3,629 3,675 3,722 3,773 Liability Liquidation Home Mtg Principal 7,701 8,025 8,362 8,714

Auto Loan 2,246 0 0 0 9,947 8,025 8,362 8,714 80

Tot Cash Outflow 83,703 76,855 78,748 80,698 END OF YEAR Cash Balance 1,000 1,000 1,000 1,000

Balance Sheet

Years 2017 through 2021

Financial Plan 2017 2018 2019 2020 2021 Age: 65/62 66/63 67/64 68/65 69/66 LIQUID ASSETS Cash Balance 993 996 1,020 1,019 1,000

Cash Deposits Checking/Savings 25,000 25,000 25,000 25,000 25,000

Investment Account 20,000 20,000 20,000 20,000 20,000 45,000 45,000 45,000 45,000 45,000 Stocks & Bonds Additional Savings 22,746 72,661 91,534 110,527 93,970

Invest Mutual Funds 104,076 108,317 112,732 117,326 122,108 126,822 180,978 204,266 227,853 216,078

Liquid Assets 172,814 226,974 250,285 273,872 262,078

NON-LIQUID ASSETS

Retirement Plans John's IRA R/O 20,800 21,632 22,497 23,397 24,333

Jane's IRA 62,920 71,157 79,954 89,222 92,791 83,720 92,789 102,451 112,619 117,124 Personal Property

Residence 342,720 349,574 356,566 363,697 370,971 342,720 349,574 356,566 363,697 370,971

81

Non-liquid Assets 426,440 442,363 459,017 476,316 488,095

Total Assets 599,254 669,337 709,302 750,188 750,173

LIABILITIES

Mortgage Loans Residence 174,413 170,891 167,221 163,397 159,412

Home Equity Line 13,136 12,394 11,613 10,792 9,930 187,549 183,285 178,834 174,189 169,342 Notes Payable

Auto Loan 2,650 996 0 0 0 2,650 996 0 0 0

Total Liabilities 190,199 184,281 178,834 174,189 169,342

Net Worth 409,055 485,056 530,468 575,999 580,831

Years 2022 through 2026

Financial Plan 2022 2023 2024 2025 2026 Age: 70/67 71/68 72/69 73/70 74/71 LIQUID ASSETS Cash Balance 1,000 1,000 1,000 1,001 1,026

Cash Deposits Checking/Savings 25,000 25,000 25,000 25,000 25,000

Investment Account 20,000 20,000 20,000 13,237 488 45,000 45,000 45,000 38,237 25,488 Stocks & Bonds Additional Savings 62,960 36,613 7,908 0 0

Invest Mutual Funds 127,085 132,264 137,654 143,265 149,103 190,045 168,877 145,562 143,265 149,103

Liquid Assets 236,045 214,877 191,562 182,502 175,617

82

NON-LIQUID ASSETS

Retirement Plans John's IRA R/O 25,306 25,363 25,387 25,374 25,323

Jane's IRA 96,503 100,363 104,378 108,553 108,799 121,809 125,726 129,765 133,927 134,122 Personal Property

Residence 378,391 385,958 393,678 401,551 409,582 378,391 385,958 393,678 401,551 409,582

Non-liquid Assets 500,200 511,684 523,443 535,478 543,704

Total Assets 736,245 726,561 715,005 717,980 719,321

LIABILITIES

Mortgage Loans Residence 155,260 150,933 146,424 141,726 136,830

Home Equity Line 9,023 8,070 7,068 6,015 4,909 164,283 159,003 153,492 147,741 141,739 Notes Payable

New Car 25,963 20,340 14,429 8,216 1,684 25,963 20,340 14,429 8,216 1,684

Total Liabilities 190,246 179,343 167,921 155,957 143,423

Net Worth 545,999 547,218 547,084 562,023 575,898

Years 2027 through 2031

Financial Plan 2027 2028 2029 2030 2031 Age: 75/72 76/73 77/74 78/75 79/76 LIQUID ASSETS Cash Balance 993 980 989 998 995

83

Cash Deposits Checking/Savings 25,000 25,000 10,907 0 0

Investment Account 488 488 0 0 0 25,488 25,488 10,907 0 0 Stocks & Bonds Additional Savings 18,531 2,718 0 0 0

Invest Mutual Funds 155,180 161,505 168,087 167,035 154,486 173,711 164,223 168,087 167,035 154,486

Liquid Assets 200,192 190,690 179,983 168,033 155,480

NON-LIQUID ASSETS

Retirement Plans John's IRA R/O 25,230 25,092 24,912 24,681 24,402

Jane's IRA 108,901 108,848 108,629 108,230 107,639 134,131 133,940 133,541 132,911 132,041 Personal Property

Residence 417,774 426,129 434,652 443,345 452,212 417,774 426,129 434,652 443,345 452,212

Non-liquid Assets 551,905 560,069 568,193 576,256 584,253

Total Assets 752,097 750,759 748,176 744,289 739,733

LIABILITIES

Mortgage Loans Residence 131,729 126,412 120,873 115,100 109,085

Home Equity Line 3,745 2,522 1,236 0 0 135,474 128,934 122,109 115,100 109,085 Notes Payable

Auto Loan 30,290 23,730 16,834 9,585 1,965 30,290 23,730 16,834 9,585 1,965 84

Total Liabilities 165,764 152,664 138,943 124,685 111,050

Net Worth 586,333 598,095 609,233 619,604 628,683

Years 2032 through 2036

Financial Plan 2032 2033 2034 2035 2036 Age: 80/77 81/78 82/79 83/80 81 LIQUID ASSETS Cash Balance 994 999 995 995 993

Stocks & Bonds Additional Savings 17,986 0 0 0 0

Invest Mutual Funds 160,782 163,435 147,532 132,052 114,596 178,768 163,435 147,532 132,052 114,596

Liquid Assets 179,762 164,434 148,527 133,047 115,589

NON-LIQUID ASSETS

Retirement Plans John's IRA R/O 24,073 23,691 23,254 22,757 22,199

Jane's IRA 106,868 105,879 104,684 103,273 101,635 130,941 129,570 127,938 126,030 123,834 Personal Property

Residence 461,256 470,481 479,891 489,489 499,278 461,256 470,481 479,891 489,489 499,278

Non-liquid Assets 592,197 600,051 607,829 615,519 623,112

Total Assets 771,959 764,485 756,356 748,566 738,701

LIABILITIES

Mortgage Loans 85

Residence 102,817 96,286 89,479 82,387 74,997 102,817 96,286 89,479 82,387 74,997 Notes Payable

Auto Loan 34,617 27,120 19,238 10,954 2,246 34,617 27,120 19,238 10,954 2,246

Total Liabilities 137,434 123,406 108,717 93,341 77,243

Net Worth 634,525 641,079 647,639 655,225 661,458

Years 2037 through 2040

Financial Plan 2037 2038 2039 2040 Age: 82 83 84 85 LIQUID ASSETS Cash Balance 1,000 1,000 1,000 1,000

Stocks & Bonds

Invest Mutual Funds 88,081 68,485 46,998 23,450 88,081 68,485 46,998 23,450

Liquid Assets 89,081 69,485 47,998 24,450

NON-LIQUID ASSETS

Retirement Plans John's IRA R/O 21,587 20,919 20,195 19,413

Jane's IRA 99,756 97,626 95,233 92,607 121,343 118,545 115,428 112,020 Personal Property

Residence 509,264 519,449 529,838 540,435 509,264 519,449 529,838 540,435

Non-liquid Assets 630,607 637,994 645,266 652,455 86

Total Assets 719,688 707,479 693,264 676,905

LIABILITIES

Mortgage Loans

Residence 67,296 59,271 50,909 42,195 67,296 59,271 50,909 42,195

Total Liabilities 67,296 59,271 50,909 42,195

Net Worth 652,392 648,208 642,355 634,710

Financial Independence Report

At the end of 2041, you will be in a sound financial position. You will not have a deficit and your assets available for liquidation will be worth $136,470, which will be available as an emergency reserve. Assets that are considered available for liquidation are liquid assets such as cash accounts, mutual funds, and retirement accounts.

Inflation will average 3% over the course of the plan. Your projected investments will appreciate at an average rate of 3.79%.

87

Appendix D: Financial Plan Scenario 3 – Single Life Annuity

Tax Projection Report

Years 2017 through 2021

Financial Plan 2017 2018 2019 2020 2021 Age: 65/62 66/63 67/64 68/65 69/66 Earned Income John's Salary 75,000 0 0 0 0 John's DB 0 26,568 26,568 26,568 26,568 Jane's Salary 55,000 56,100 57,222 58,366 0 - - - - Jane's IRA 5,500 5,500 5,722 5,837 0 124,500 77,168 78,068 79,098 26,568 Interest/Dividends Investment Account 10 100 200 300 400 Additional Savings 112 329 547 774 835 Invest Mutual Funds 508 528 550 572 595

Invest Mutual Funds 1,523 1,585 1,649 1,716 1,786 2,152 2,542 2,946 3,362 3,617 Other

Txbl Social Sec 0 30,600 31,120 31,649 12,039 0 30,600 31,120 31,649 12,039

Net Capital Gain 620 857 1,097 1,346 1,986

Adj Gross Income 127,272 111,167 113,231 115,455 44,209

Deductions Medical 0 0 0 1,038 8,540 Charitable 50% 1,200 1,236 1,273 1,311 1,351 Real Estate Tax 2,182 2,226 2,270 2,316 2,362 DMV Fees 550 523 496 472 448 Home Mortg Int 7,271 7,128 6,980 6,826 6,665 Home Equity Line 676 641 602 562 521

Misc Expense Ded 0 0 0 0 1,281 Gross Deductions 11,879 11,753 11,622 12,524 21,168 88

Standard Deduction 13,950 14,400 14,850 16,600 17,100 Allowed Deductions 13,950 14,400 14,850 16,600 21,168 Pers Exemptions 8,100 8,400 8,600 8,900 9,200

Taxable Income 105,222 88,367 89,781 89,955 13,841

Fed Income Tax 17,659 12,743 12,773 12,480 1,042

Fed Tax Bracket-Ord Inc 25.0% 25.0% 25.0% 25.0% 10.0%

Years 2022 through 2026

Financial Plan 2022 2023 2024 2025 2026 Age: 70/67 71/68 72/69 73/70 74/71 Earned Income John's IRA R/O 0 955 991 1,028 1,066 John's DB 26,568 26,568 26,568 26,568 26,568

Jane's IRA 0 0 0 0 4,096 26,568 27,523 27,559 27,596 31,730 Interest/Dividends Investment Account 400 400 400 400 362 Additional Savings 658 435 224 71 14 Invest Mutual Funds 620 645 671 699 727

Invest Mutual Funds 1,859 1,935 2,014 2,096 2,181 3,537 3,415 3,309 3,265 3,284 Other

Txbl Social Sec 13,063 13,977 14,581 20,665 24,012 13,063 13,977 14,581 20,665 24,012

Net Capital Gain 2,949 2,864 3,312 1,889 1,189

Adj Gross Income 46,117 47,779 48,761 53,416 60,215

Deductions Medical 8,738 8,973 9,287 9,246 9,004 89

Charitable 50% 1,391 1,433 1,476 1,520 1,566 Real Estate Tax 2,409 2,457 2,506 2,557 2,608 DMV Fees 600 570 542 514 489 Home Mortg Int 6,498 6,323 6,141 5,952 5,754 Home Equity Line 476 430 381 330 277

Misc Expense Ded 1,286 1,296 1,322 1,275 1,186 Gross Deductions 21,399 21,482 21,655 21,395 20,884

Standard Deduction 17,700 18,200 18,800 19,300 19,900 Allowed Deductions 21,399 21,482 21,655 21,395 20,884 Pers Exemptions 9,400 9,700 10,000 10,300 10,600

Taxable Income 15,318 16,597 17,106 21,721 28,732

Fed Income Tax 1,109 1,265 1,290 1,906 2,748

Fed Tax Bracket-Ord Inc 10.0% 10.0% 10.0% 10.0% 15.0%

Years 2027 through 2031

Financial Plan 2027 2028 2029 2030 2031 Age: 75/72 76/73 77/74 78/75 79/76 Earned Income John's IRA R/O 1,106 1,147 1,184 1,227 1,266 John's DB 26,568 26,568 26,568 26,568 26,568

Jane's IRA 4,250 4,409 4,573 4,744 4,920 31,924 32,124 32,325 32,539 32,754 Interest/Dividends Investment Account 324 324 324 240 78 Additional Savings 118 190 91 19 0 Invest Mutual Funds 757 788 820 853 888

Invest Mutual Funds 2,270 2,363 2,459 2,559 2,663 3,469 3,664 3,694 3,671 3,629 Other

Txbl Social Sec 24,486 25,452 26,282 26,699 27,087 90

24,486 25,452 26,282 26,699 27,087

Net Capital Gain 875 1,115 1,351 1,132 888

Adj Gross Income 60,754 62,355 63,651 64,041 64,358

Deductions Medical 9,401 9,705 10,054 10,507 10,983 Charitable 50% 1,613 1,661 1,711 1,762 1,815 Real Estate Tax 2,660 2,713 2,767 2,823 2,879 DMV Fees 600 570 542 514 489 Home Mortg Int 5,549 5,333 5,111 4,877 4,635 Home Equity Line 219 160 97 31 0

Misc Expense Ded 1,223 1,240 1,263 1,306 1,352 Gross Deductions 21,265 21,382 21,545 21,821 22,153

Standard Deduction 20,500 21,100 21,800 22,400 23,100 Allowed Deductions 21,265 21,382 21,800 22,400 23,100 Pers Exemptions 11,000 11,300 11,600 12,000 12,300

Taxable Income 28,489 29,673 30,251 29,641 28,958

Fed Income Tax 2,701 2,787 2,808 2,764 2,718

Fed Tax Bracket-Ord Inc 15.0% 15.0% 15.0% 10.0% 10.0%

Years 2032 through 2036

Financial Plan 2032 2033 2034 2035 2036 Age: 80/77 81/78 82/79 83/80 81 Earned Income John's IRA R/O 1,305 1,345 1,385 1,427 1,468 John's DB 26,568 26,568 26,568 26,568 26,568

Jane's IRA 5,077 5,264 5,430 5,598 5,769 32,950 33,177 33,383 33,593 33,805 Interest/Dividends Additional Savings 115 154 39 0 0 91

Invest Mutual Funds 924 962 1,001 1,034 995

Invest Mutual Funds 2,772 2,885 3,003 3,103 2,984 3,811 4,001 4,042 4,137 3,978 Other

Txbl Social Sec 27,992 29,092 29,795 30,515 34,101 27,992 29,092 29,795 30,515 34,101

Net Capital Gain 1,039 1,372 1,396 1,375 4,967

Adj Gross Income 65,792 67,642 68,616 69,620 76,852

Deductions Medical 11,362 11,715 12,172 12,643 12,508 Charitable 50% 1,870 1,926 1,983 2,043 2,104 Real Estate Tax 2,937 2,995 3,055 3,116 3,179 DMV Fees 500 475 451 429 407 Home Mortg Int 4,382 4,119 3,843 3,558 3,260

Misc Expense Ded 1,376 1,393 1,428 1,464 1,377 Gross Deductions 22,427 22,623 22,933 23,254 22,835

Standard Deduction 23,800 24,600 25,300 26,000 26,800 Allowed Deductions 23,800 24,600 25,300 26,000 26,800 Pers Exemptions 12,700 13,100 13,500 13,900 14,300

Taxable Income 29,292 29,942 29,816 29,720 35,752

Fed Income Tax 2,721 2,745 2,738 2,731 2,979

Fed Tax Bracket-Ord Inc 10.0% 10.0% 10.0% 10.0% 10.0%

Years 2037 through 2040

Financial Plan 2037 2038 2039 2040 Age: 82 83 84 85 Earned Income John's IRA R/O 1,500 1,531 1,561 1,590 92

Jane's IRA 5,944 6,120 6,298 6,435 7,444 7,651 7,859 8,025 Interest/Dividends Invest Mutual Funds 834 707 569 419

Invest Mutual Funds 2,503 2,120 1,706 1,257 3,338 2,827 2,275 1,676 Other

Txbl Social Sec 4,081 3,206 3,443 3,427 4,081 3,206 3,443 3,427

Net Capital Gain 11,017 9,259 9,759 9,838

Adj Gross Income 25,880 22,944 23,335 22,967

Deductions Medical 7,866 8,473 8,757 9,127 Charitable 50% 2,167 2,232 2,299 2,368 Real Estate Tax 3,242 3,307 3,373 3,441 DMV Fees 387 368 349 332 Home Mortg Int 2,949 2,625 2,288 1,936

Misc Expense Ded 2,454 2,572 2,625 2,695 Gross Deductions 19,065 19,577 19,692 19,898

Standard Deduction 27,600 28,400 29,400 30,200 Allowed Deductions 27,600 28,400 29,400 30,200 Pers Exemptions 14,700 15,200 15,600 16,100

Fed Income Tax 0 0 0 0

Fed Tax Bracket-Ord Inc .0% .0% .0% .0%

Cash Flow Statement

Years 2017 through 2021

Financial Plan 2017 2018 2019 2020 2021 93

Age: 65/62 66/63 67/64 68/65 69/66 BEGINNING OF YEAR Idle Cash On Hand 1,000 993 996 997 998

SOURCES OF CASH

Cash Income John's Salary 75,000 0 0 0 0 John's DB 0 26,568 26,568 26,568 26,568 Jane's Salary 55,000 56,100 57,222 58,366 0 John's Soc Security 0 24,000 24,408 24,823 25,245 Jane's Soc Security 0 12,000 12,204 12,411 12,622

Interest+Dividends 10 100 200 300 400 130,010 118,768 120,602 122,469 64,835 Sale/Withdrawals

Additional Savings 0 0 0 0 14,179 0 0 0 0 14,179

Total Cash Inflow 130,010 118,768 120,602 122,469 79,014

Tot Cash Available 131,010 119,761 121,598 123,466 80,012

USES OF CASH

Fully Tax Deductible Jane's IRA 5,500 5,500 5,722 5,837 0 Home Mortg Int 7,271 7,128 6,980 6,826 6,665

Home Equity Line 676 641 602 562 521 13,447 13,269 13,304 13,225 7,186 Partly Deductible John's Medicare B 1,608 1,656 1,706 1,757 1,810 Jane's Medicare B 0 0 0 1,757 1,810 Supplemental Ins. 6,800 7,004 7,214 7,431 7,653 Medicine & Drugs 1,000 1,030 1,061 1,093 1,126 Dentist 500 515 530 546 563 Charity Contrb-50% 1,200 1,236 1,273 1,311 1,351 94

Financial Plan Fee 2,000 2,040 2,081 2,122 2,165 13,108 13,481 13,865 16,017 16,477 Not Tax Deductible Auto Loan Interest 142 77 14 0 0 Groceries 10,000 10,300 10,609 10,927 11,255 Outside Meals 2,400 2,472 2,546 2,623 2,701 Clothing 1,200 1,236 1,273 1,311 1,351 Entertainment 2,000 2,060 2,122 2,185 2,251 Vacations 4,000 4,120 4,244 4,371 4,502 Gifts 3,000 3,090 3,183 3,278 3,377 Gas 2,400 2,472 2,546 2,623 2,701 Auto Repairs 500 515 530 546 563 Life Insurance 800 800 800 800 800 Property/Liability 680 700 721 743 765 Auto Insurance 2,000 2,060 2,122 2,185 2,251 Jane Disability Ins 950 950 950 950 0 Repair/Maintenance 200 206 212 219 225 Gardener 1,200 1,236 1,273 1,311 1,351 Utilities 3,600 3,708 3,819 3,934 4,052 Phones 2,100 2,163 2,228 2,295 2,364 Cable/Internet 1,200 1,236 1,273 1,311 1,351 Personal Care 1,000 1,030 1,061 1,093 1,126 Pets 1,200 1,236 1,273 1,311 1,351 Memberships 300 309 318 328 338 Lifestyle Increase 2,478 2,248 2,304 2,254 0

Miscellaneous 1,800 1,854 1,910 1,967 2,026 45,150 46,078 47,332 48,565 46,698 Taxes Paid Fed Tax Paid 17,659 12,743 12,773 12,480 1,042 FICA/Soc Sec Tax 9,946 4,292 4,377 4,465 0 Real Estate Tax 2,182 2,226 2,270 2,316 2,362

DMV Fees 550 523 496 472 448 30,337 19,783 19,917 19,732 3,852 Purchase/Deposits

Additional Savings 22,300 20,235 20,736 20,284 0 22,300 20,235 20,736 20,284 0 95

Liability Liquidation Home Mtg Principal 3,379 3,522 3,670 3,824 3,985 Auto Loan 1,589 1,654 996 0 0

Home Equity Line 707 742 781 821 862 5,675 5,918 5,447 4,645 4,847

Tot Cash Outflow 130,017 118,765 120,601 122,468 79,060 END OF YEAR Cash Balance 993 996 997 998 952

Years 2022 through 2026

Financial Plan 2022 2023 2024 2025 2026 Age: 70/67 71/68 72/69 73/70 74/71 BEGINNING OF YEAR Idle Cash On Hand 952 999 999 998 998

SOURCES OF CASH

Cash Income John's IRA R/O 0 955 991 1,028 1,066 John's DB 26,568 26,568 26,568 26,568 26,568 Jane's IRA 0 0 0 0 4,096 John's Soc Security 25,674 26,111 26,554 27,006 27,465 Jane's Soc Security 12,837 13,055 13,277 30,000 30,510

Interest+Dividends 400 400 400 400 362 65,479 67,089 67,791 85,002 90,067 Sale/Withdrawals Additional Savings 27,839 22,159 23,464 8,913 2,994

Investment Account 0 0 0 0 3,803 27,839 22,159 23,464 8,913 6,797 Liab Incurred

Auto Loan 30,000 0 0 0 0 30,000 0 0 0 0

96

Total Cash Inflow 123,318 89,248 91,255 93,915 96,864

Tot Cash Available 124,270 90,247 92,253 94,913 97,862

USES OF CASH

Fully Tax Deductible Home Mortg Int 6,498 6,323 6,141 5,952 5,754

Home Equity Line 476 430 381 330 277 6,974 6,753 6,522 6,282 6,031 Partly Deductible John's Medicare B 1,864 1,920 1,978 2,037 2,098 Jane's Medicare B 1,864 1,920 1,978 2,037 2,098 Supplemental Ins. 7,883 8,120 8,363 8,614 8,872 Medicine & Drugs 1,159 1,194 1,230 1,267 1,305 Dentist 580 597 615 633 652 Charity Contrb-50% 1,391 1,433 1,476 1,520 1,566

Financial Plan Fee 2,208 2,252 2,297 2,343 2,390 16,949 17,436 17,936 18,451 18,982 Not Tax Deductible Auto Loan Interest 1,058 1,171 883 581 262 Groceries 11,593 11,941 12,299 12,668 13,048 Outside Meals 2,782 2,866 2,952 3,040 3,131 Clothing 1,391 1,433 1,476 1,520 1,566 Entertainment 2,319 2,388 2,460 2,534 2,610 Vacations 4,637 4,776 4,919 5,067 5,219 Gifts 3,478 3,582 3,690 3,800 3,914 Gas 2,782 2,866 2,952 3,040 3,131 Auto Repairs 580 597 615 633 652 Life Insurance 800 0 0 0 0 Property/Liability 788 812 836 861 887 Auto Insurance 2,319 2,388 2,460 2,534 2,610 Repair/Maintenance 232 239 246 253 261 Gardener 1,391 1,433 1,476 1,520 1,566 Utilities 4,173 4,299 4,428 4,560 4,697 Phones 2,434 2,508 2,583 2,660 2,740 Cable/Internet 1,391 1,433 1,476 1,520 1,566 Personal Care 1,159 1,194 1,230 1,267 1,305 97

Pets 1,391 1,433 1,476 1,520 1,566 Memberships 348 358 369 380 391

Miscellaneous 2,087 2,149 2,214 2,280 2,349 49,133 49,864 51,037 52,240 53,471 Taxes Paid Fed Tax Paid 1,109 1,265 1,290 1,906 2,748 Real Estate Tax 2,409 2,457 2,506 2,557 2,608

DMV Fees 600 570 542 514 489 4,118 4,293 4,338 4,977 5,844 Purchase/Deposits

New Car 37,000 0 0 0 0 37,000 0 0 0 0 Liability Liquidation Home Mtg Principal 4,152 4,327 4,509 4,698 4,896 Auto Loan 4,037 5,623 5,911 6,213 6,532

Home Equity Line 907 953 1,002 1,053 1,106 9,096 10,903 11,422 11,964 12,534

Tot Cash Outflow 123,271 89,249 91,255 93,915 96,861 END OF YEAR Cash Balance 999 999 998 998 1,001

Years 2027 through 2031

Financial Plan 2027 2028 2029 2030 2031 Age: 75/72 76/73 77/74 78/75 79/76 BEGINNING OF YEAR Idle Cash On Hand 1,001 980 987 958 995

SOURCES OF CASH

Cash Income John's IRA R/O 1,106 1,147 1,184 1,227 1,266 John's DB 26,568 26,568 26,568 26,568 26,568 Jane's IRA 4,250 4,409 4,573 4,744 4,920 98

John's Soc Security 27,932 28,407 28,890 29,381 29,880 Jane's Soc Security 31,029 31,556 32,093 32,638 33,193

Interest+Dividends 324 324 324 240 78 91,209 92,411 93,631 94,798 95,905 Sale/Withdrawals Additional Savings 0 10,163 11,224 3,921 0 Checking/Savings 0 0 0 0 4,546

Investment Account 0 0 0 8,410 7,787 0 10,163 11,224 12,331 12,333 Liab Incurred

Auto Loan 35,000 0 0 0 0 35,000 0 0 0 0

Total Cash Inflow 126,209 102,574 104,855 107,129 108,238

Tot Cash Available 127,209 103,554 105,843 108,086 109,233

USES OF CASH

Fully Tax Deductible Home Mortg Int 5,549 5,333 5,111 4,877 4,635

Home Equity Line 219 160 97 31 0 5,768 5,493 5,208 4,908 4,635 Partly Deductible John's Medicare B 2,161 2,226 2,293 2,361 2,432 Jane's Medicare B 2,161 2,226 2,292 2,361 2,432 Supplemental Ins. 9,139 9,413 9,695 9,986 10,286 Medicine & Drugs 1,344 1,384 1,426 1,469 1,513 Dentist 672 692 713 734 756 Charity Contrb-50% 1,613 1,661 1,711 1,762 1,815 Financial Plan Fee 2,438 2,487 2,536 2,587 2,639 19,527 20,089 20,666 21,261 21,873 Not Tax Deductible Auto Loan Interest 14 0 0 0 0 Auto Loan 1,234 1,366 1,030 677 306 Groceries 13,439 13,842 14,258 14,685 15,126 99

Outside Meals 3,225 3,322 3,422 3,524 3,630 Clothing 1,613 1,661 1,711 1,762 1,815 Entertainment 2,688 2,768 2,852 2,937 3,025 Vacations 5,376 5,537 5,703 5,874 6,050 Gifts 4,032 4,153 4,277 4,406 4,538 Gas 3,225 3,322 3,422 3,524 3,630 Auto Repairs 672 692 713 734 756 Property/Liability 914 941 970 999 1,029 Auto Insurance 2,688 2,768 2,852 2,937 3,025 Repair/Maintenance 269 277 285 294 303 Gardener 1,613 1,661 1,711 1,762 1,815 Utilities 4,838 4,983 5,133 5,287 5,445 Phones 2,822 2,907 2,994 3,084 3,176 Cable/Internet 1,613 1,661 1,711 1,762 1,815 Personal Care 1,344 1,384 1,426 1,469 1,513 Pets 1,613 1,661 1,711 1,762 1,815 Memberships 403 415 428 441 454 Lifestyle Increase 2,626 0 0 0 0

Miscellaneous 2,419 2,492 2,566 2,643 2,723 58,679 57,815 59,173 60,564 61,989 Taxes Paid Fed Tax Paid 2,701 2,787 2,808 2,764 2,718 Real Estate Tax 2,660 2,713 2,767 2,823 2,879

DMV Fees 600 570 542 514 489 5,961 6,070 6,117 6,101 6,086 Purchase/Deposits

Additional Savings 23,635 0 0 0 0 23,635 0 0 0 0 Liability Liquidation Home Mtg Principal 5,101 5,317 5,539 5,773 6,015 Auto Loan 1,684 0 0 0 0 Home Equity Line 1,164 1,223 1,286 1,236 0

Auto Loan 4,710 6,560 6,896 7,249 7,620 12,659 13,100 13,721 14,258 13,635

Tot Cash Outflow 126,229 102,567 104,885 107,092 108,218 100

END OF YEAR Cash Balance 980 987 958 995 1,015

Years 2032 through 2036

Financial Plan 2032 2033 2034 2035 2036 Age: 80/77 81/78 82/79 83/80 81 BEGINNING OF YEAR Idle Cash On Hand 1,015 998 985 973 977

SOURCES OF CASH

Cash Income John's IRA R/O 1,305 1,345 1,385 1,427 1,468 John's DB 26,568 26,568 26,568 26,568 26,568 Jane's IRA 5,077 5,264 5,430 5,598 5,769 John's Soc Security 30,388 30,905 31,430 31,964 32,508

Jane's Soc Security 33,757 34,331 34,915 35,508 36,112 97,095 98,413 99,728 101,066 102,425 Sale/Withdrawals Additional Savings 0 16,089 8,083 0 0 Invest Mutual Funds 0 0 0 1,450 16,124

Checking/Savings 0 0 7,384 13,070 0 0 16,089 15,467 14,520 16,124 Liab Incurred

Auto Loan 40,000 0 0 0 0 40,000 0 0 0 0

Total Cash Inflow 137,095 114,502 115,195 115,586 118,549

Tot Cash Available 138,110 115,500 116,180 116,559 119,526

USES OF CASH

Fully Tax Deductible 101

Home Mortg Int 4,382 4,119 3,843 3,558 3,260 4,382 4,119 3,843 3,558 3,260 Partly Deductible John's Medicare B 2,505 2,580 2,658 2,738 2,820 Jane's Medicare B 2,505 2,580 2,658 2,737 2,819 Supplemental Ins. 10,594 10,912 11,239 11,577 11,924 Medicine & Drugs 1,558 1,605 1,653 1,702 1,754 Dentist 779 802 826 851 877 Charity Contrb-50% 1,870 1,926 1,983 2,043 2,104

Financial Plan Fee 2,692 2,746 2,800 2,856 2,914 22,503 23,151 23,818 24,504 25,211 Not Tax Deductible Auto Loan Interest 1,411 1,561 1,176 774 350 Auto Loan 16 0 0 0 0 Groceries 15,580 16,047 16,528 17,024 17,535 Outside Meals 3,739 3,851 3,967 4,086 4,208 Clothing 1,870 1,926 1,983 2,043 2,104 Entertainment 3,116 3,209 3,306 3,405 3,507 Vacations 6,232 6,419 6,611 6,810 7,014 Gifts 4,674 4,814 4,959 5,107 5,261 Gas 3,739 3,851 2,000 2,060 2,122 Auto Repairs 779 802 826 450 464 Property/Liability 1,059 1,091 1,124 1,158 1,192 Auto Insurance 3,116 3,209 3,306 1,500 1,545 Repair/Maintenance 312 321 331 340 351 Gardener 1,870 1,926 1,983 2,043 2,104 Utilities 5,609 5,777 5,950 6,129 6,313 Phones 3,272 3,370 3,471 3,575 3,682 Cable/Internet 1,870 1,926 1,983 2,043 2,104 Personal Care 1,558 1,605 1,653 1,702 1,754 Pets 1,870 1,926 1,983 2,043 2,104 Memberships 467 481 496 511 526 Lifestyle Increase 2,549 0 0 0 0

Miscellaneous 2,804 2,888 2,975 3,064 3,156 67,510 67,001 66,612 65,867 67,396 Taxes Paid Fed Tax Paid 2,721 2,745 2,738 2,731 2,979 102

Real Estate Tax 2,937 2,995 3,055 3,116 3,179

DMV Fees 500 475 451 429 407 6,158 6,216 6,245 6,276 6,565 Purchase/Deposits

Additional Savings 22,944 0 0 0 0 22,944 0 0 0 0 Liability Liquidation Home Mtg Principal 6,268 6,531 6,807 7,092 7,390 Auto Loan 5,383 7,497 7,882 8,284 8,708

Auto Loan 1,965 0 0 0 0 13,616 14,028 14,689 15,376 16,098

Tot Cash Outflow 137,113 114,515 115,207 115,582 118,530 END OF YEAR Cash Balance 998 985 973 977 996

Years 2037 through 2040

Financial Plan 2037 2038 2039 2040 Age: 82 83 84 85 BEGINNING OF YEAR Idle Cash On Hand 996 1,000 1,000 1,000

SOURCES OF CASH

Cash Income John's IRA R/O 1,500 1,531 1,561 1,590 Jane's IRA 5,944 6,120 6,298 6,435

Jane's Soc Security 36,726 37,350 37,985 38,631 44,170 45,001 45,844 46,656 Sale/Withdrawals

Invest Mutual Funds 39,538 31,853 32,904 34,043 39,538 31,853 32,904 34,043

103

Total Cash Inflow 83,708 76,854 78,748 80,699

Tot Cash Available 84,704 77,854 79,748 81,699

USES OF CASH

Fully Tax Deductible

Home Mortg Int 2,949 2,625 2,288 1,936 2,949 2,625 2,288 1,936 Partly Deductible Jane's Medicare B 2,904 2,991 3,081 3,173 Supplemental Ins. 6,100 6,283 6,471 6,666 Medicine & Drugs 1,000 1,030 1,061 1,093 Dentist 450 464 477 492 Charity Contrb-50% 2,167 2,232 2,299 2,368

Financial Plan Fee 2,972 3,031 3,092 3,154 15,593 16,031 16,482 16,946 Not Tax Deductible Auto Loan Interest 19 0 0 0 Groceries 9,000 9,270 9,548 9,835 Outside Meals 2,200 2,266 2,334 2,404 Clothing 1,500 1,545 1,591 1,639 Entertainment 2,000 2,060 2,122 2,185 Vacations 3,500 3,605 3,713 3,825 Gifts 5,418 5,581 5,748 5,921 Gas 2,185 0 0 0 Auto Repairs 477 0 0 0 Property/Liability 1,228 1,265 1,303 1,342 Auto Insurance 1,591 0 0 0 Repair/Maintenance 361 372 383 395 Gardener 2,167 2,232 2,299 2,368 Utilities 6,502 6,697 6,898 7,105 Phones 3,793 3,907 4,024 4,145 Cable/Internet 2,167 2,232 2,299 2,368 Personal Care 1,806 1,860 1,916 1,974 Pets 2,167 0 0 0 Memberships 250 258 265 273 104

Miscellaneous 3,251 3,349 3,449 3,552 51,585 46,499 47,894 49,330 Taxes Paid Real Estate Tax 3,242 3,307 3,373 3,441

DMV Fees 387 368 349 332 3,629 3,675 3,722 3,773 Liability Liquidation Home Mtg Principal 7,701 8,025 8,362 8,714

Auto Loan 2,246 0 0 0 9,947 8,025 8,362 8,714

Tot Cash Outflow 83,703 76,855 78,748 80,698 END OF YEAR Cash Balance 1,000 1,000 1,000 1,000

Balance Sheet

Years 2017 through 2021

Financial Plan 2017 2018 2019 2020 2021 Age: 65/62 66/63 67/64 68/65 69/66 LIQUID ASSETS Cash Balance 993 996 997 998 952

Cash Deposits Checking/Savings 25,000 25,000 25,000 25,000 25,000

Investment Account 20,000 20,000 20,000 20,000 20,000 45,000 45,000 45,000 45,000 45,000 Stocks & Bonds Additional Savings 22,746 44,296 67,219 90,597 79,758

Invest Mutual Funds 104,076 108,317 112,732 117,326 122,108 126,822 152,613 179,951 207,923 201,866

Liquid Assets 172,814 198,610 225,948 253,921 247,818

NON-LIQUID ASSETS 105

Retirement Plans John's IRA R/O 20,800 21,632 22,497 23,397 24,333

Jane's IRA 62,920 71,157 79,954 89,222 92,791 83,720 92,789 102,451 112,619 117,124 Personal Property

Residence 342,720 349,574 356,566 363,697 370,971 342,720 349,574 356,566 363,697 370,971

Non-liquid Assets 426,440 442,363 459,017 476,316 488,095

Total Assets 599,254 640,973 684,965 730,237 735,913

LIABILITIES

Mortgage Loans Residence 174,413 170,891 167,221 163,397 159,412

Home Equity Line 13,136 12,394 11,613 10,792 9,930 187,549 183,285 178,834 174,189 169,342 Notes Payable

Auto Loan 2,650 996 0 0 0 2,650 996 0 0 0

Total Liabilities 190,199 184,281 178,834 174,189 169,342

Net Worth 409,055 456,692 506,131 556,048 566,571

Years 2022 through 2026

Financial Plan 2022 2023 2024 2025 2026 Age: 70/67 71/68 72/69 73/70 74/71 LIQUID ASSETS Cash Balance 999 999 998 998 1,001

Cash Deposits Checking/Savings 25,000 25,000 25,000 25,000 25,000

Investment Account 20,000 20,000 20,000 20,000 16,197 106

45,000 45,000 45,000 45,000 41,197 Stocks & Bonds Additional Savings 54,553 34,133 11,565 2,936 0

Invest Mutual Funds 127,085 132,264 137,654 143,265 149,103 181,638 166,397 149,219 146,201 149,103

Liquid Assets 227,637 212,395 195,217 192,199 191,301

NON-LIQUID ASSETS

Retirement Plans John's IRA R/O 25,306 25,363 25,387 25,374 25,323

Jane's IRA 96,503 100,363 104,378 108,553 108,799 121,809 125,726 129,765 133,927 134,122 Personal Property

Residence 378,391 385,958 393,678 401,551 409,582 378,391 385,958 393,678 401,551 409,582

Non-liquid Assets 500,200 511,684 523,443 535,478 543,704

Total Assets 727,837 724,079 718,660 727,677 735,005

LIABILITIES

Mortgage Loans Residence 155,260 150,933 146,424 141,726 136,830

Home Equity Line 9,023 8,070 7,068 6,015 4,909 164,283 159,003 153,492 147,741 141,739 Notes Payable

New Car 25,963 20,340 14,429 8,216 1,684 25,963 20,340 14,429 8,216 1,684

Total Liabilities 190,246 179,343 167,921 155,957 143,423

Net Worth 537,591 544,736 550,739 571,720 591,582

Years 2027 through 2031 107

Financial Plan 2027 2028 2029 2030 2031 Age: 75/72 76/73 77/74 78/75 79/76 LIQUID ASSETS Cash Balance 980 987 958 995 1,015

Cash Deposits Checking/Savings 25,000 25,000 25,000 25,000 20,454

Investment Account 16,197 16,197 16,197 7,787 0 41,197 41,197 41,197 32,787 20,454 Stocks & Bonds Additional Savings 24,108 14,706 3,846 0 0

Invest Mutual Funds 155,180 161,505 168,087 174,937 182,067 179,288 176,211 171,933 174,937 182,067

Liquid Assets 221,466 218,395 214,088 208,719 203,536

NON-LIQUID ASSETS

Retirement Plans John's IRA R/O 25,230 25,092 24,912 24,681 24,402

Jane's IRA 108,901 108,848 108,629 108,230 107,639 134,131 133,940 133,541 132,911 132,041 Personal Property

Residence 417,774 426,129 434,652 443,345 452,212 417,774 426,129 434,652 443,345 452,212

Non-liquid Assets 551,905 560,069 568,193 576,256 584,253

Total Assets 773,371 778,464 782,281 784,975 787,789

LIABILITIES

Mortgage Loans Residence 131,729 126,412 120,873 115,100 109,085

Home Equity Line 3,745 2,522 1,236 0 0 135,474 128,934 122,109 115,100 109,085 Notes Payable 108

Auto Loan 30,290 23,730 16,834 9,585 1,965 30,290 23,730 16,834 9,585 1,965

Total Liabilities 165,764 152,664 138,943 124,685 111,050

Net Worth 607,607 625,800 643,338 660,290 676,739

Years 2032 through 2036

Financial Plan 2032 2033 2034 2035 2036 Age: 80/77 81/78 82/79 83/80 81 LIQUID ASSETS Cash Balance 998 985 973 977 996

Cash Deposits

Checking/Savings 20,454 20,454 13,070 0 0 20,454 20,454 13,070 0 0 Stocks & Bonds Additional Savings 23,403 7,928 0 0 0

Invest Mutual Funds 189,487 197,210 205,247 212,103 203,967 212,890 205,138 205,247 212,103 203,967

Liquid Assets 234,342 226,577 219,291 213,080 204,962

NON-LIQUID ASSETS

Retirement Plans John's IRA R/O 24,073 23,691 23,254 22,757 22,199

Jane's IRA 106,868 105,879 104,684 103,273 101,635 130,941 129,570 127,938 126,030 123,834 Personal Property

Residence 461,256 470,481 479,891 489,489 499,278 461,256 470,481 479,891 489,489 499,278

Non-liquid Assets 592,197 600,051 607,829 615,519 623,112

Total Assets 826,539 826,628 827,120 828,599 828,074 109

LIABILITIES

Mortgage Loans

Residence 102,817 96,286 89,479 82,387 74,997 102,817 96,286 89,479 82,387 74,997 Notes Payable

Auto Loan 34,617 27,120 19,238 10,954 2,246 34,617 27,120 19,238 10,954 2,246

Total Liabilities 137,434 123,406 108,717 93,341 77,243

Net Worth 689,105 703,222 718,403 735,258 750,831

Years 2037 through 2040

Financial Plan 2037 2038 2039 2040 Age: 82 83 84 85 LIQUID ASSETS Cash Balance 1,000 1,000 1,000 1,000

Stocks & Bonds

Invest Mutual Funds 171,130 144,953 116,616 85,938 171,130 144,953 116,616 85,938

Liquid Assets 172,130 145,953 117,616 86,939

NON-LIQUID ASSETS

Retirement Plans John's IRA R/O 21,587 20,919 20,195 19,413

Jane's IRA 99,756 97,626 95,233 92,607 121,343 118,545 115,428 112,020 Personal Property

Residence 509,264 519,449 529,838 540,435 509,264 519,449 529,838 540,435

110

Non-liquid Assets 630,607 637,994 645,266 652,455

Total Assets 802,737 783,947 762,882 739,394

LIABILITIES

Mortgage Loans

Residence 67,296 59,271 50,909 42,195 67,296 59,271 50,909 42,195

Total Liabilities 67,296 59,271 50,909 42,195

Net Worth 735,441 724,676 711,973 697,199

Financial Independence Report

At the end of 2041, you will be in a sound financial position. You will not have a deficit and your assets available for liquidation will be worth $198,959, which will be available as an emergency reserve. Assets that are considered available for liquidation are liquid assets such as cash accounts, mutual funds, and retirement accounts.

Inflation will average 3% over the course of the plan. Your projected investments will appreciate at an average rate of 3.79%.

Appendix E: Financial Plan Scenario 4 – 50% Joint and Survivor Annuity

Tax Projection Report

Years 2017 through 2021

Financial Plan 2017 2018 2019 2020 2021 Age: 65/62 66/63 67/64 68/65 69/66 Earned Income John's Salary 75,000 0 0 0 0 John's DB 0 23,364 23,364 23,364 23,364 Jane's Salary 55,000 56,100 57,222 58,366 0 111

- - - - Jane's IRA 5,500 5,500 5,722 5,837 0 124,500 73,964 74,864 75,894 23,364 Interest/Dividends Investment Account 10 100 200 300 400 Additional Savings 112 318 514 718 755 Invest Mutual Funds 508 528 550 572 595

Invest Mutual Funds 1,523 1,585 1,649 1,716 1,786 2,152 2,531 2,913 3,306 3,537 Other

Txbl Social Sec 0 30,600 31,120 31,649 9,281 0 30,600 31,120 31,649 9,281

Net Capital Gain 620 846 1,064 1,290 2,026

Adj Gross Income 127,272 107,941 109,961 112,139 38,208

Deductions Medical 0 0 0 1,370 9,140 Charitable 50% 1,200 1,236 1,273 1,311 1,351 Real Estate Tax 2,182 2,226 2,270 2,316 2,362 DMV Fees 550 523 496 472 448 Home Mortg Int 7,271 7,128 6,980 6,826 6,665 Home Equity Line 676 641 602 562 521

Misc Expense Ded 0 0 0 0 1,401 Gross Deductions 11,879 11,753 11,622 12,856 21,888

Standard Deduction 13,950 14,400 14,850 16,600 17,100 Allowed Deductions 13,950 14,400 14,850 16,600 21,888 Pers Exemptions 8,100 8,400 8,600 8,900 9,200

Taxable Income 105,222 85,141 86,511 86,639 7,120

Fed Income Tax 17,659 11,938 11,962 11,544 374

Fed Tax Bracket-Ord Inc 25.0% 25.0% 25.0% 15.0% 10.0%

112

Years 2022 through 2026

Financial Plan 2022 2023 2024 2025 2026 Age: 70/67 71/68 72/69 73/70 74/71 Earned Income John's IRA R/O 0 955 991 1,028 1,066 John's DB 23,364 23,364 23,364 23,364 23,364

Jane's IRA 0 0 0 0 4,096 23,364 24,319 24,355 24,392 28,526 Interest/Dividends Investment Account 400 400 328 141 13 Additional Savings 549 296 90 0 0 Invest Mutual Funds 620 645 671 699 727

Invest Mutual Funds 1,859 1,935 2,014 2,096 2,181 3,428 3,276 3,103 2,935 2,921 Other

Txbl Social Sec 10,332 11,270 11,272 16,650 20,587 10,332 11,270 11,272 16,650 20,587

Net Capital Gain 3,049 3,022 2,829 699 727

Adj Gross Income 40,173 41,887 41,559 44,676 52,762

Deductions Medical 9,333 9,562 10,007 10,120 9,749 Charitable 50% 1,391 1,433 1,476 1,520 1,566 Real Estate Tax 2,409 2,457 2,506 2,557 2,608 DMV Fees 600 570 542 514 489 Home Mortg Int 6,498 6,323 6,141 5,952 5,754 Home Equity Line 476 430 381 330 277

Misc Expense Ded 1,405 1,414 1,466 1,449 1,335 Gross Deductions 22,112 22,190 22,519 22,443 21,778

Standard Deduction 17,700 18,200 18,800 19,300 19,900 Allowed Deductions 22,112 22,190 22,519 22,443 21,778 Pers Exemptions 9,400 9,700 10,000 10,300 10,600

113

Taxable Income 8,661 9,997 9,040 11,934 20,384

Fed Income Tax 444 603 545 1,054 1,893

Fed Tax Bracket-Ord Inc 10.0% 10.0% 10.0% 10.0% 10.0%

Years 2027 through 2031

Financial Plan 2027 2028 2029 2030 2031 Age: 75/72 76/73 77/74 78/75 79/76 Earned Income John's IRA R/O 1,106 1,147 1,184 1,227 1,266 John's DB 23,364 23,364 23,364 23,364 23,364

Jane's IRA 4,250 4,409 4,573 4,744 4,920 28,720 28,920 29,121 29,335 29,550 Interest/Dividends Additional Savings 106 151 45 0 0 Invest Mutual Funds 757 788 820 838 795

Invest Mutual Funds 2,270 2,363 2,459 2,515 2,386 3,133 3,301 3,324 3,354 3,182 Other

Txbl Social Sec 21,467 22,436 23,179 23,888 26,336 21,467 22,436 23,179 23,888 26,336

Net Capital Gain 863 1,134 1,275 1,347 3,656

Adj Gross Income 54,182 55,791 56,899 57,924 62,723

Deductions Medical 10,058 10,362 10,729 11,119 11,147 Charitable 50% 1,613 1,661 1,711 1,762 1,815 Real Estate Tax 2,660 2,713 2,767 2,823 2,879 DMV Fees 600 570 542 514 489 Home Mortg Int 5,549 5,333 5,111 4,877 4,635 Home Equity Line 219 160 97 31 0 114

Misc Expense Ded 1,354 1,371 1,398 1,429 1,385 Gross Deductions 22,053 22,169 22,355 22,555 22,349

Standard Deduction 20,500 21,100 21,800 22,400 23,100 Allowed Deductions 22,053 22,169 22,355 22,555 23,100 Pers Exemptions 11,000 11,300 11,600 12,000 12,300

Taxable Income 21,129 22,322 22,943 23,368 27,323

Fed Income Tax 1,940 2,025 2,080 2,118 2,287

Fed Tax Bracket-Ord Inc 10.0% 10.0% 10.0% 10.0% 10.0%

Years 2032 through 2036

Financial Plan 2032 2033 2034 2035 2036 Age: 80/77 81/78 82/79 83/80 81 Earned Income John's IRA R/O 1,305 1,345 1,385 1,427 1,468 John's DB 23,364 23,364 23,364 23,364 23,364

Jane's IRA 5,077 5,264 5,430 5,598 5,769 29,746 29,973 30,179 30,389 30,601 Interest/Dividends Additional Savings 103 117 14 0 0 Invest Mutual Funds 828 862 819 765 702

Invest Mutual Funds 2,483 2,585 2,457 2,295 2,106 3,414 3,563 3,290 3,060 2,808 Other

Txbl Social Sec 24,839 25,947 28,975 29,804 30,644 24,839 25,947 28,975 29,804 30,644

Net Capital Gain 931 1,313 4,388 4,820 5,274

Adj Gross Income 58,931 60,796 66,833 68,073 69,327

115

Deductions Medical 12,048 12,400 12,351 12,798 13,261 Charitable 50% 1,870 1,926 1,983 2,043 2,104 Real Estate Tax 2,937 2,995 3,055 3,116 3,179 DMV Fees 500 475 451 429 407 Home Mortg Int 4,382 4,119 3,843 3,558 3,260

Misc Expense Ded 1,513 1,530 1,463 1,495 1,527 Gross Deductions 23,250 23,445 23,147 23,439 23,737

Standard Deduction 23,800 24,600 25,300 26,000 26,800 Allowed Deductions 23,800 24,600 25,300 26,000 26,800 Pers Exemptions 12,700 13,100 13,500 13,900 14,300

Taxable Income 22,431 23,096 28,033 28,173 28,227

Fed Income Tax 2,057 2,081 2,281 2,259 2,225

Fed Tax Bracket-Ord Inc 10.0% 10.0% 10.0% 10.0% 10.0%

Years 2037 through 2040

Financial Plan 2037 2038 2039 2040 Age: 82 83 84 85 Earned Income John's IRA R/O 1,500 1,531 1,561 1,590 John's DB 11,676 11,676 11,676 11,676

Jane's IRA 5,944 6,120 6,298 6,435 19,120 19,327 19,535 19,701 Interest/Dividends Invest Mutual Funds 589 511 424 328

Invest Mutual Funds 1,768 1,532 1,272 983 2,357 2,043 1,695 1,311 Other

Txbl Social Sec 9,064 7,677 8,165 7,803 9,064 7,677 8,165 7,803 116

Net Capital Gain 7,765 5,928 6,324 5,794

Adj Gross Income 38,306 34,975 35,719 34,608

Deductions Medical 6,623 7,270 7,519 7,963 Charitable 50% 2,167 2,232 2,299 2,368 Real Estate Tax 3,242 3,307 3,373 3,441 DMV Fees 387 368 349 332 Home Mortg Int 2,949 2,625 2,288 1,936

Misc Expense Ded 2,206 2,331 2,378 2,462 Gross Deductions 17,575 18,133 18,206 18,501

Standard Deduction 27,600 28,400 29,400 30,200 Allowed Deductions 27,600 28,400 29,400 30,200 Pers Exemptions 14,700 15,200 15,600 16,100

Fed Income Tax 0 0 0 0

Fed Tax Bracket-Ord Inc .0% .0% .0% .0%

Cash Flow Statement

Years 2017 through 2021

Financial Plan 2017 2018 2019 2020 2021 Age: 65/62 66/63 67/64 68/65 69/66 BEGINNING OF YEAR Idle Cash On Hand 1,000 993 997 998 1,022

SOURCES OF CASH

Cash Income John's Salary 75,000 0 0 0 0 John's DB 0 23,364 23,364 23,364 23,364 Jane's Salary 55,000 56,100 57,222 58,366 0 117

John's Soc Security 0 24,000 24,408 24,823 25,245 Jane's Soc Security 0 12,000 12,204 12,411 12,622

Interest+Dividends 10 100 200 300 400 130,010 115,564 117,398 119,265 61,631 Sale/Withdrawals

Additional Savings 0 0 0 0 16,738 0 0 0 0 16,738

Total Cash Inflow 130,010 115,564 117,398 119,265 78,369

Tot Cash Available 131,010 116,557 118,395 120,263 79,392

USES OF CASH

Fully Tax Deductible Jane's IRA 5,500 5,500 5,722 5,837 0 Home Mortg Int 7,271 7,128 6,980 6,826 6,665

Home Equity Line 676 641 602 562 521 13,447 13,269 13,304 13,225 7,186 Partly Deductible John's Medicare B 1,608 1,656 1,706 1,757 1,810 Jane's Medicare B 0 0 0 1,757 1,810 Supplemental Ins. 6,800 7,004 7,214 7,431 7,653 Medicine & Drugs 1,000 1,030 1,061 1,093 1,126 Dentist 500 515 530 546 563 Charity Contrb-50% 1,200 1,236 1,273 1,311 1,351

Financial Plan Fee 2,000 2,040 2,081 2,122 2,165 13,108 13,481 13,865 16,017 16,477 Not Tax Deductible Auto Loan Interest 142 77 14 0 0 Groceries 10,000 10,300 10,609 10,927 11,255 Outside Meals 2,400 2,472 2,546 2,623 2,701 Clothing 1,200 1,236 1,273 1,311 1,351 Entertainment 2,000 2,060 2,122 2,185 2,251 Vacations 4,000 4,120 4,244 4,371 4,502 Gifts 3,000 3,090 3,183 3,278 3,377 118

Gas 2,400 2,472 2,546 2,623 2,701 Auto Repairs 500 515 530 546 563 Life Insurance 800 800 800 800 800 Property/Liability 680 700 721 743 765 Auto Insurance 2,000 2,060 2,122 2,185 2,251 Jane Disability Ins 950 950 950 950 0 Repair/Maintenance 200 206 212 219 225 Gardener 1,200 1,236 1,273 1,311 1,351 Utilities 3,600 3,708 3,819 3,934 4,052 Phones 2,100 2,163 2,228 2,295 2,364 Cable/Internet 1,200 1,236 1,273 1,311 1,351 Personal Care 1,000 1,030 1,061 1,093 1,126 Pets 1,200 1,236 1,273 1,311 1,351 Memberships 300 309 318 328 338 Lifestyle Increase 2,478 2,008 2,065 2,025 0

Miscellaneous 1,800 1,854 1,910 1,967 2,026 45,150 45,838 47,093 48,336 46,698 Taxes Paid Fed Tax Paid 17,659 11,938 11,962 11,544 374 FICA/Soc Sec Tax 9,946 4,292 4,377 4,465 0 Real Estate Tax 2,182 2,226 2,270 2,316 2,362

DMV Fees 550 523 496 472 448 30,337 18,979 19,106 18,796 3,184 Purchase/Deposits

Additional Savings 22,300 18,075 18,582 18,221 0 22,300 18,075 18,582 18,221 0 Liability Liquidation Home Mtg Principal 3,379 3,522 3,670 3,824 3,985 Auto Loan 1,589 1,654 996 0 0

Home Equity Line 707 742 781 821 862 5,675 5,918 5,447 4,645 4,847

Tot Cash Outflow 130,017 115,560 117,397 119,240 78,392 END OF YEAR Cash Balance 993 997 998 1,022 999

119

Years 2022 through 2026

Financial Plan 2022 2023 2024 2025 2026 Age: 70/67 71/68 72/69 73/70 74/71 BEGINNING OF YEAR Idle Cash On Hand 999 999 998 1,001 1,024

SOURCES OF CASH

Cash Income John's IRA R/O 0 955 991 1,028 1,066 John's DB 23,364 23,364 23,364 23,364 23,364 Jane's IRA 0 0 0 0 4,096 John's Soc Security 25,674 26,111 26,554 27,006 27,465 Jane's Soc Security 12,837 13,055 13,277 30,000 30,510

Interest+Dividends 400 400 328 141 13 62,275 63,885 64,515 81,539 86,514 Sale/Withdrawals Additional Savings 30,330 24,702 18,817 0 0 Checking/Savings 0 0 0 0 8,199

Investment Account 0 0 7,181 11,546 1,273 30,330 24,702 25,998 11,546 9,472 Liab Incurred

Auto Loan 30,000 0 0 0 0 30,000 0 0 0 0

Total Cash Inflow 122,605 88,587 90,513 93,085 95,986

Tot Cash Available 123,605 89,585 91,511 94,085 97,009

USES OF CASH

Fully Tax Deductible Home Mortg Int 6,498 6,323 6,141 5,952 5,754

Home Equity Line 476 430 381 330 277 6,974 6,753 6,522 6,282 6,031 120

Partly Deductible John's Medicare B 1,864 1,920 1,978 2,037 2,098 Jane's Medicare B 1,864 1,920 1,978 2,037 2,098 Supplemental Ins. 7,883 8,120 8,363 8,614 8,872 Medicine & Drugs 1,159 1,194 1,230 1,267 1,305 Dentist 580 597 615 633 652 Charity Contrb-50% 1,391 1,433 1,476 1,520 1,566 Financial Plan Fee 2,208 2,252 2,297 2,343 2,390 16,949 17,436 17,936 18,451 18,982 Not Tax Deductible Auto Loan Interest 1,058 1,171 883 581 262 Groceries 11,593 11,941 12,299 12,668 13,048 Outside Meals 2,782 2,866 2,952 3,040 3,131 Clothing 1,391 1,433 1,476 1,520 1,566 Entertainment 2,319 2,388 2,460 2,534 2,610 Vacations 4,637 4,776 4,919 5,067 5,219 Gifts 3,478 3,582 3,690 3,800 3,914 Gas 2,782 2,866 2,952 3,040 3,131 Auto Repairs 580 597 615 633 652 Life Insurance 800 0 0 0 0 Property/Liability 788 812 836 861 887 Auto Insurance 2,319 2,388 2,460 2,534 2,610 Repair/Maintenance 232 239 246 253 261 Gardener 1,391 1,433 1,476 1,520 1,566 Utilities 4,173 4,299 4,428 4,560 4,697 Phones 2,434 2,508 2,583 2,660 2,740 Cable/Internet 1,391 1,433 1,476 1,520 1,566 Personal Care 1,159 1,194 1,230 1,267 1,305 Pets 1,391 1,433 1,476 1,520 1,566 Memberships 348 358 369 380 391

Miscellaneous 2,087 2,149 2,214 2,280 2,349 49,133 49,864 51,037 52,240 53,471 Taxes Paid Fed Tax Paid 444 603 545 1,054 1,893 Real Estate Tax 2,409 2,457 2,506 2,557 2,608

DMV Fees 600 570 542 514 489 3,453 3,631 3,593 4,125 4,989 Purchase/Deposits 121

New Car 37,000 0 0 0 0 37,000 0 0 0 0 Liability Liquidation Home Mtg Principal 4,152 4,327 4,509 4,698 4,896 Auto Loan 4,037 5,623 5,911 6,213 6,532

Home Equity Line 907 953 1,002 1,053 1,106 9,096 10,903 11,422 11,964 12,534

Tot Cash Outflow 122,606 88,587 90,510 93,062 96,007 END OF YEAR Cash Balance 999 998 1,001 1,024 1,003

Years 2027 through 2031

Financial Plan 2027 2028 2029 2030 2031 Age: 75/72 76/73 77/74 78/75 79/76 BEGINNING OF YEAR Idle Cash On Hand 1,003 993 987 962 957

SOURCES OF CASH

Cash Income John's IRA R/O 1,106 1,147 1,184 1,227 1,266 John's DB 23,364 23,364 23,364 23,364 23,364 Jane's IRA 4,250 4,409 4,573 4,744 4,920 John's Soc Security 27,932 28,407 28,890 29,381 29,880

Jane's Soc Security 31,029 31,556 32,093 32,638 33,193 87,681 88,883 90,103 91,354 92,623 Sale/Withdrawals Additional Savings 0 12,916 9,427 0 0 Invest Mutual Funds 0 0 0 2,888 15,204

Checking/Savings 0 0 4,601 12,200 0 0 12,916 14,028 15,088 15,204 Liab Incurred 122

Auto Loan 35,000 0 0 0 0 35,000 0 0 0 0

Total Cash Inflow 122,681 101,799 104,131 106,442 107,827

Tot Cash Available 123,683 102,792 105,119 107,404 108,785

USES OF CASH

Fully Tax Deductible Home Mortg Int 5,549 5,333 5,111 4,877 4,635

Home Equity Line 219 160 97 31 0 5,768 5,493 5,208 4,908 4,635 Partly Deductible John's Medicare B 2,161 2,226 2,293 2,361 2,432 Jane's Medicare B 2,161 2,226 2,292 2,361 2,432 Supplemental Ins. 9,139 9,413 9,695 9,986 10,286 Medicine & Drugs 1,344 1,384 1,426 1,469 1,513 Dentist 672 692 713 734 756 Charity Contrb-50% 1,613 1,661 1,711 1,762 1,815

Financial Plan Fee 2,438 2,487 2,536 2,587 2,639 19,527 20,089 20,666 21,261 21,873 Not Tax Deductible Auto Loan Interest 14 0 0 0 0 Auto Loan 1,234 1,366 1,030 677 306 Groceries 13,439 13,842 14,258 14,685 15,126 Outside Meals 3,225 3,322 3,422 3,524 3,630 Clothing 1,613 1,661 1,711 1,762 1,815 Entertainment 2,688 2,768 2,852 2,937 3,025 Vacations 5,376 5,537 5,703 5,874 6,050 Gifts 4,032 4,153 4,277 4,406 4,538 Gas 3,225 3,322 3,422 3,524 3,630 Auto Repairs 672 692 713 734 756 Property/Liability 914 941 970 999 1,029 Auto Insurance 2,688 2,768 2,852 2,937 3,025 Repair/Maintenance 269 277 285 294 303 Gardener 1,613 1,661 1,711 1,762 1,815 123

Utilities 4,838 4,983 5,133 5,287 5,445 Phones 2,822 2,907 2,994 3,084 3,176 Cable/Internet 1,613 1,661 1,711 1,762 1,815 Personal Care 1,344 1,384 1,426 1,469 1,513 Pets 1,613 1,661 1,711 1,762 1,815 Memberships 403 415 428 441 454 Lifestyle Increase 2,348 0 0 0 0

Miscellaneous 2,419 2,492 2,566 2,643 2,723 58,401 57,815 59,173 60,564 61,989 Taxes Paid Fed Tax Paid 1,940 2,025 2,080 2,118 2,287 Real Estate Tax 2,660 2,713 2,767 2,823 2,879

DMV Fees 600 570 542 514 489 5,200 5,308 5,389 5,455 5,655 Purchase/Deposits

Additional Savings 21,135 0 0 0 0 21,135 0 0 0 0 Liability Liquidation Home Mtg Principal 5,101 5,317 5,539 5,773 6,015 Auto Loan 1,684 0 0 0 0 Home Equity Line 1,164 1,223 1,286 1,236 0

Auto Loan 4,710 6,560 6,896 7,249 7,620 12,659 13,100 13,721 14,258 13,635

Tot Cash Outflow 122,690 101,805 104,157 106,446 107,787 END OF YEAR Cash Balance 993 987 962 957 997

Years 2032 through 2036

Financial Plan 2032 2033 2034 2035 2036 Age: 80/77 81/78 82/79 83/80 81 BEGINNING OF YEAR Idle Cash On Hand 997 998 979 996 996

124

SOURCES OF CASH

Cash Income John's IRA R/O 1,305 1,345 1,385 1,427 1,468 John's DB 23,364 23,364 23,364 23,364 23,364 Jane's IRA 5,077 5,264 5,430 5,598 5,769 John's Soc Security 30,388 30,905 31,430 31,964 32,508

Jane's Soc Security 33,757 34,331 34,915 35,508 36,112 93,891 95,209 96,524 97,862 99,221 Sale/Withdrawals Additional Savings 0 18,622 2,960 0 0

Invest Mutual Funds 0 0 15,283 17,248 18,554 0 18,622 18,243 17,248 18,554 Liab Incurred

Auto Loan 40,000 0 0 0 0 40,000 0 0 0 0

Total Cash Inflow 133,891 113,831 114,767 115,110 117,775

Tot Cash Available 134,889 114,829 115,746 116,106 118,771

USES OF CASH

Fully Tax Deductible

Home Mortg Int 4,382 4,119 3,843 3,558 3,260 4,382 4,119 3,843 3,558 3,260 Partly Deductible John's Medicare B 2,505 2,580 2,658 2,738 2,820 Jane's Medicare B 2,505 2,580 2,658 2,737 2,819 Supplemental Ins. 10,594 10,912 11,239 11,577 11,924 Medicine & Drugs 1,558 1,605 1,653 1,702 1,754 Dentist 779 802 826 851 877 Charity Contrb-50% 1,870 1,926 1,983 2,043 2,104

Financial Plan Fee 2,692 2,746 2,800 2,856 2,914 22,503 23,151 23,818 24,504 25,211 125

Not Tax Deductible Auto Loan Interest 1,411 1,561 1,176 774 350 Auto Loan 16 0 0 0 0 Groceries 15,580 16,047 16,528 17,024 17,535 Outside Meals 3,739 3,851 3,967 4,086 4,208 Clothing 1,870 1,926 1,983 2,043 2,104 Entertainment 3,116 3,209 3,306 3,405 3,507 Vacations 6,232 6,419 6,611 6,810 7,014 Gifts 4,674 4,814 4,959 5,107 5,261 Gas 3,739 3,851 2,000 2,060 2,122 Auto Repairs 779 802 826 450 464 Property/Liability 1,059 1,091 1,124 1,158 1,192 Auto Insurance 3,116 3,209 3,306 1,500 1,545 Repair/Maintenance 312 321 331 340 351 Gardener 1,870 1,926 1,983 2,043 2,104 Utilities 5,609 5,777 5,950 6,129 6,313 Phones 3,272 3,370 3,471 3,575 3,682 Cable/Internet 1,870 1,926 1,983 2,043 2,104 Personal Care 1,558 1,605 1,653 1,702 1,754 Pets 1,870 1,926 1,983 2,043 2,104 Memberships 467 481 496 511 526 Lifestyle Increase 2,294 0 0 0 0

Miscellaneous 2,804 2,888 2,975 3,064 3,156 67,255 67,001 66,612 65,867 67,396 Taxes Paid Fed Tax Paid 2,057 2,081 2,281 2,259 2,225 Real Estate Tax 2,937 2,995 3,055 3,116 3,179

DMV Fees 500 475 451 429 407 5,494 5,551 5,788 5,804 5,811 Purchase/Deposits

Additional Savings 20,642 0 0 0 0 20,642 0 0 0 0 Liability Liquidation Home Mtg Principal 6,268 6,531 6,807 7,092 7,390 Auto Loan 5,383 7,497 7,882 8,284 8,708

Auto Loan 1,965 0 0 0 0 126

13,616 14,028 14,689 15,376 16,098

Tot Cash Outflow 133,891 113,850 114,750 115,110 117,776 END OF YEAR Cash Balance 998 979 996 996 994

Years 2037 through 2040

Financial Plan 2037 2038 2039 2040 Age: 82 83 84 85 BEGINNING OF YEAR Idle Cash On Hand 994 1,000 1,000 1,000

SOURCES OF CASH

Cash Income John's IRA R/O 1,500 1,531 1,561 1,590 John's DB 11,676 11,676 11,676 11,676 Jane's IRA 5,944 6,120 6,298 6,435

Jane's Soc Security 36,726 37,350 37,985 38,631 55,846 56,677 57,520 58,332 Sale/Withdrawals

Invest Mutual Funds 27,863 20,177 21,228 22,367 27,863 20,177 21,228 22,367

Total Cash Inflow 83,709 76,854 78,748 80,699

Tot Cash Available 84,703 77,854 79,748 81,699

USES OF CASH

Fully Tax Deductible

Home Mortg Int 2,949 2,625 2,288 1,936 2,949 2,625 2,288 1,936 Partly Deductible Jane's Medicare B 2,904 2,991 3,081 3,173 127

Supplemental Ins. 6,100 6,283 6,471 6,666 Medicine & Drugs 1,000 1,030 1,061 1,093 Dentist 450 464 477 492 Charity Contrb-50% 2,167 2,232 2,299 2,368

Financial Plan Fee 2,972 3,031 3,092 3,154 15,593 16,031 16,482 16,946 Not Tax Deductible Auto Loan Interest 19 0 0 0 Groceries 9,000 9,270 9,548 9,835 Outside Meals 2,200 2,266 2,334 2,404 Clothing 1,500 1,545 1,591 1,639 Entertainment 2,000 2,060 2,122 2,185 Vacations 3,500 3,605 3,713 3,825 Gifts 5,418 5,581 5,748 5,921 Gas 2,185 0 0 0 Auto Repairs 477 0 0 0 Property/Liability 1,228 1,265 1,303 1,342 Auto Insurance 1,591 0 0 0 Repair/Maintenance 361 372 383 395 Gardener 2,167 2,232 2,299 2,368 Utilities 6,502 6,697 6,898 7,105 Phones 3,793 3,907 4,024 4,145 Cable/Internet 2,167 2,232 2,299 2,368 Personal Care 1,806 1,860 1,916 1,974 Pets 2,167 0 0 0 Memberships 250 258 265 273

Miscellaneous 3,251 3,349 3,449 3,552 51,585 46,499 47,894 49,330 Taxes Paid Real Estate Tax 3,242 3,307 3,373 3,441

DMV Fees 387 368 349 332 3,629 3,675 3,722 3,773 Liability Liquidation Home Mtg Principal 7,701 8,025 8,362 8,714

Auto Loan 2,246 0 0 0 9,947 8,025 8,362 8,714 128

Tot Cash Outflow 83,703 76,855 78,748 80,698 END OF YEAR Cash Balance 1,000 1,000 1,000 1,000

Balance Sheet

Years 2017 through 2021

Financial Plan 2017 2018 2019 2020 2021 Age: 65/62 66/63 67/64 68/65 69/66 LIQUID ASSETS Cash Balance 993 997 998 1,022 999

Cash Deposits Checking/Savings 25,000 25,000 25,000 25,000 25,000

Investment Account 20,000 20,000 20,000 20,000 20,000 45,000 45,000 45,000 45,000 45,000 Stocks & Bonds Additional Savings 22,746 42,092 62,729 83,824 70,104

Invest Mutual Funds 104,076 108,317 112,732 117,326 122,108 126,822 150,409 175,461 201,150 192,212

Liquid Assets 172,814 196,406 221,458 247,172 238,211

NON-LIQUID ASSETS

Retirement Plans John's IRA R/O 20,800 21,632 22,497 23,397 24,333

Jane's IRA 62,920 71,157 79,954 89,222 92,791 83,720 92,789 102,451 112,619 117,124 Personal Property

Residence 342,720 349,574 356,566 363,697 370,971 342,720 349,574 356,566 363,697 370,971

129

Non-liquid Assets 426,440 442,363 459,017 476,316 488,095

Total Assets 599,254 638,769 680,475 723,488 726,306

LIABILITIES

Mortgage Loans Residence 174,413 170,891 167,221 163,397 159,412

Home Equity Line 13,136 12,394 11,613 10,792 9,930 187,549 183,285 178,834 174,189 169,342 Notes Payable

Auto Loan 2,650 996 0 0 0 2,650 996 0 0 0

Total Liabilities 190,199 184,281 178,834 174,189 169,342

Net Worth 409,055 454,488 501,641 549,299 556,964

Years 2022 through 2026

Financial Plan 2022 2023 2024 2025 2026 Age: 70/67 71/68 72/69 73/70 74/71 LIQUID ASSETS Cash Balance 999 998 1,001 1,024 1,003

Cash Deposits Checking/Savings 25,000 25,000 25,000 25,000 16,801

Investment Account 20,000 20,000 12,819 1,273 0 45,000 45,000 37,819 26,273 16,801 Stocks & Bonds Additional Savings 41,972 18,455 0 0 0

Invest Mutual Funds 127,085 132,264 137,654 143,265 149,103 169,057 150,719 137,654 143,265 149,103

Liquid Assets 215,055 196,717 176,474 170,561 166,907

130

NON-LIQUID ASSETS

Retirement Plans John's IRA R/O 25,306 25,363 25,387 25,374 25,323

Jane's IRA 96,503 100,363 104,378 108,553 108,799 121,809 125,726 129,765 133,927 134,122 Personal Property

Residence 378,391 385,958 393,678 401,551 409,582 378,391 385,958 393,678 401,551 409,582

Non-liquid Assets 500,200 511,684 523,443 535,478 543,704

Total Assets 715,255 708,401 699,917 706,039 710,611

LIABILITIES

Mortgage Loans Residence 155,260 150,933 146,424 141,726 136,830

Home Equity Line 9,023 8,070 7,068 6,015 4,909 164,283 159,003 153,492 147,741 141,739 Notes Payable

New Car 25,963 20,340 14,429 8,216 1,684 25,963 20,340 14,429 8,216 1,684

Total Liabilities 190,246 179,343 167,921 155,957 143,423

Net Worth 525,009 529,058 531,996 550,082 567,188

Years 2027 through 2031

Financial Plan 2027 2028 2029 2030 2031 Age: 75/72 76/73 77/74 78/75 79/76 LIQUID ASSETS Cash Balance 993 987 962 957 997

131

Cash Deposits

Checking/Savings 16,801 16,801 12,200 0 0 16,801 16,801 12,200 0 0 Stocks & Bonds Additional Savings 21,558 9,246 0 0 0

Invest Mutual Funds 155,180 161,505 168,087 171,932 163,115 176,738 170,751 168,087 171,932 163,115

Liquid Assets 194,532 188,539 181,249 172,889 164,113

NON-LIQUID ASSETS

Retirement Plans John's IRA R/O 25,230 25,092 24,912 24,681 24,402

Jane's IRA 108,901 108,848 108,629 108,230 107,639 134,131 133,940 133,541 132,911 132,041 Personal Property

Residence 417,774 426,129 434,652 443,345 452,212 417,774 426,129 434,652 443,345 452,212

Non-liquid Assets 551,905 560,069 568,193 576,256 584,253

Total Assets 746,437 748,608 749,442 749,145 748,366

LIABILITIES

Mortgage Loans Residence 131,729 126,412 120,873 115,100 109,085

Home Equity Line 3,745 2,522 1,236 0 0 135,474 128,934 122,109 115,100 109,085 Notes Payable

Auto Loan 30,290 23,730 16,834 9,585 1,965 30,290 23,730 16,834 9,585 1,965

132

Total Liabilities 165,764 152,664 138,943 124,685 111,050

Net Worth 580,673 595,944 610,499 624,460 637,316

Years 2032 through 2036

Financial Plan 2032 2033 2034 2035 2036 Age: 80/77 81/78 82/79 83/80 81 LIQUID ASSETS Cash Balance 998 979 996 996 994

Stocks & Bonds Additional Savings 21,055 2,903 0 0 0

Invest Mutual Funds 169,763 176,682 167,977 156,872 143,955 190,818 179,585 167,977 156,872 143,955

Liquid Assets 191,816 180,564 168,973 157,868 144,950

NON-LIQUID ASSETS

Retirement Plans John's IRA R/O 24,073 23,691 23,254 22,757 22,199

Jane's IRA 106,868 105,879 104,684 103,273 101,635 130,941 129,570 127,938 126,030 123,834 Personal Property

Residence 461,256 470,481 479,891 489,489 499,278 461,256 470,481 479,891 489,489 499,278

Non-liquid Assets 592,197 600,051 607,829 615,519 623,112

Total Assets 784,013 780,615 776,802 773,387 768,062

LIABILITIES

Mortgage Loans 133

Residence 102,817 96,286 89,479 82,387 74,997 102,817 96,286 89,479 82,387 74,997 Notes Payable

Auto Loan 34,617 27,120 19,238 10,954 2,246 34,617 27,120 19,238 10,954 2,246

Total Liabilities 137,434 123,406 108,717 93,341 77,243

Net Worth 646,579 657,209 668,085 680,046 690,819

Years 2037 through 2040

Financial Plan 2037 2038 2039 2040 Age: 82 83 84 85 LIQUID ASSETS Cash Balance 1,000 1,000 1,000 1,000

Stocks & Bonds

Invest Mutual Funds 120,824 104,748 86,924 67,188 120,824 104,748 86,924 67,188

Liquid Assets 121,824 105,748 87,924 68,189

NON-LIQUID ASSETS

Retirement Plans John's IRA R/O 21,587 20,919 20,195 19,413

Jane's IRA 99,756 97,626 95,233 92,607 121,343 118,545 115,428 112,020 Personal Property

Residence 509,264 519,449 529,838 540,435 509,264 519,449 529,838 540,435

Non-liquid Assets 630,607 637,994 645,266 652,455 134

Total Assets 752,431 743,742 733,190 720,644

LIABILITIES

Mortgage Loans

Residence 67,296 59,271 50,909 42,195 67,296 59,271 50,909 42,195

Total Liabilities 67,296 59,271 50,909 42,195

Net Worth 685,135 684,471 682,281 678,449 Financial Independence Report

At the end of 2041, you will be in a sound financial position. You will not have a deficit and your assets available for liquidation will be worth $180,209, which will be available as an emergency reserve. Assets that are considered available for liquidation are liquid assets such as cash accounts, mutual funds, and retirement accounts.

Inflation will average 3% over the course of the plan. Your projected investments will appreciate at an average rate of 3.79%.