Lets Talk - Genworth Financial...Getting Specific Afford the life you want INSIDE Let ’ s Talk...

genworth.com/lets-talk 1

Brought to you by

4 Age With Style Everyonewantstoage

withstyle–what’syours?

8 The Best Time Thinkofretirementas

anexcitingnewchapter

11 Getting Specific Affordthelifeyouwant

INSIDE

Let’s TalkConversations that make a difference. Now and in your future.

SECOND EDITION

10784306/18/10


talking about retirement may be the best investment of all.

Everyone has a fuzzy picture in their mind of their future, but few people take the time to really focus on what they see. Hopefully with a lot of imagining and the right mapping, you will be able to focus in on those notions you’ve always had for your retirement with a more refined clarity—a focused image.


For a variety of reasons, some couples are not talking about a very important part of life: the second “half ” of it. And that phase means a lot more than it used to – Americans are now living well into their 80s and beyond, and it’s not uncom-mon to hear of a 100th birthday celebration. To be clear, not talking about retirement is very common – it’s not just you. It’s a big subject that gets to the core of who you are as an individual and as one half of a couple and how you define a life well lived. It’s a big subject but an exciting one as well, because this is when you start dreaming out loud, planning how to reap the rewards you’ve worked hard for. And once you start the conversation, you’ll probably wonder why you didn’t do it sooner.

One of the reasons you may be waiting to talk with your loved ones about retirement is that you have wishes that you may have to balance with practical issues. How will

you pay for the life you have imagined? How will you make sure that if you live to be 100 or more, you’ll have enough money to last? How will you sustain a life and a lifestyle that allows you to fly to visit family several times a year, each and every year you live? Or to stop shoveling snow and soak up the sun’s rays during winter months, even at age 100?

Your talks about how to have life “your way,” for your whole life, may not be easy to start, and they might not be comfortable or easy at first, but having these conversations can make you happier and more confident about imagin-ing and then making the retirement you desire a reality.

“Having plenty of money but no plan can be as frustrating as having a solid plan and no money.”

When we look into the future, most of us see some-body else there with us: a spouse, a partner, a sibling, or a close circle of friends. So here’s a question: do the people you see there know how they figure into your future? And if so, do you have a shared vision for your future?

Tom and Sue had been dreaming about – and planning for – retirement while the kids were still in school. They wanted to be explorers, following the sun in their big new RV with all the bells and whistles. And they planned on a lot of bells and whistles, because they’d been doing all the right things financially. They had savings, and their investment portfolio reflected a nice mix of caution and risk, in addition to Social Security. When they put their house on the market, they aimed high and still got what they asked for. The one thing they didn’t do was test drive the plan. And when they hit the road, it hit back. Tom hated maneuvering the huge vehicle. The small kitchen made Sue crazy. Tom missed his buddies at the car club, and Sue missed growing tomatoes, which had been the pride of the neighborhood. They had a plan – but they hadn’t planned for this. They wanted to go home. Uh-oh.

Everybody wants to age with style. What’syours?

It’s no surprise that there’s a physical dimension to your retirement years. But did you know there’s also an “aging style.” Do you know yours? How about your partner’s? Does one of you plan to hike the Appalachian Trail, only to learn that the other wants to make award-winning goat cheese? Do you want to stay put, or hit the road? Do you want to volunteer at a local food bank or join the Peace Corps and live in service of others? Will you want to be close to family or far away? And once you decide on your perfect retirement scenario, will you be as sure about the reality as you were about the fantasy?


Art and Margaret started talking about retirement when they were still in their 40s – and it’s a good thing they did. Margaret’s idea of a perfect “second half” bore no resemblance whatsoever to Art’s. Margaret was a nurse and a European history buff who had always dreamed of living abroad one day. Art was a regional director for a large office supply company and spent much of each month on the road. His dream was to sit by the ocean and watch the waves come and go. What they did share was a love of the coastline of Maine, where they had honeymooned and visited several times since. Because they started the conversation to build their shared vision early, time was on their side. They built a home on a rugged stretch of coast and then started investigating house-swap options with families in European countries. As they suspected, it was such a beautiful spot, visitors were always interested. Now, every year, Art and Margaret spend a month or two in another country, and the rest of the time in Maine. They’ve made friends all over the world, and have seen the places Margaret has always dreamed of. Their retirement looks exactly the way they pictured it.

In a quiet moment, sit down with your partner, and each of you describe on paper what your perfect retirement looks like. Where will you live? How will you spend your time? Will you travel? Volunteer? What do you really want to do? Be? Anything and everything that exists in your perfect retirement scenario goes on the list.

Now compare lists. First, look for the common ground. Then look at where your lists differ. What can you live without that your partner cannot? Don’t be surprised to see something on your partner’s list that you never considered, that opens up new worlds for you.

From this information, this give-and-take, you’ll build your Master List, your shared vision of retirement. It may look different from what you imagined. It may look far better than you could have hoped. Happy surprises are just one of the benefits of teamwork.

The Master ListYour handbook for the second half.

While 6% of Americans believe retirement will be a period of winding down, 57% now define retirement as an exciting new chapter in life. Age Wave/Harris Interactive Survey, January 2010

Do you remember when and where you were your happiest? Get out the family album and have a look. Where were you when your smiles were the biggest? At the beach? In the mountains? Enjoying the culture of a big, vibrant city? Were you surrounded by family, or certain close friends? Family photos are a wonderful source of information for what makes you happiest. Consider them clues that will help guide you to the perfect next phase.



The Psychology of change

Once you start talking about how you will live in retirement, and you’re beginning to build your shared view of your future, other facets of your life will come into play. You’ll want to understand where you are emotionally and philosophically – not just financially. What makes each of you feel whole? How do you adjust to change in general? Will you welcome spending a lot more time with your partner, or will the thought of such close proximity bring up other feelings? The answers to these questions can tell you how in sync you are, and whether you’ll need to make adjustments. And the sooner you make those adjustments, the more time you’ll have to reap the rewards. Being on the same page has never been more important.

It wasn’t all work…What is there about your working life that you’ll miss when you don’t have it anymore? Will it be a sense of community? A familiar routine? Will you miss the self-esteem that comes from a successful career and being valued for your knowledge and experience? What are the emotional riches that your working life has given you? How will you replace these things? And how will you live when you’re no longer at the peak of your earning capacity? Will you be afraid to spend, or will you want to spend every dime you’ve saved to make sure retirement is your happiest life phase?

And it won’t always be work.Many people believe they will always work, regardless of what age they retire. In fact, 70% of all Boomer retirees believe they are going to work part-time in retirement. But wanting to work is no guarantee you’ll be able.1 Jobs are hard to come by these days, and there’s fierce competition for every one of them. And even though you may be in perfect health on retirement day, there’s no guarantee that you’ll always have the ability to work when you want.

MYTH NO. 1H O W M U C H Y O U N E E D F O R R E T I R E M E N T I S T H E M O S T I M P O R TA N T T H I N G .Actually, no. How you want to live should come way before how much you need to do it.

MYTH NO. 2T H E M O R E M O N E Y Y O U H AV E , T H E H A P P I E R YO U R R E T I R E M E N T. Not necessarily so. Sure, with more money comes more choice, but first you have to identify the right choices for you.

MYTH NO. 3T H E T R A N S I T I O N T O R E T I R E M E N T I S E A S Y. The good news is, it can be. And the more planning, imagining, and talking you do beforehand, the easier it can be. But change – even a much-anticipated change – can be stressful.

MYTH NO. 4R E T I R E M E N T M E A N S T H AT Y O U D I S E N G A G E .For some people, yes. But for those who stay active and interested, this can be a much richer time – and also a much longer one!

TheFourBiggestRetirementMyths

- VINCE LOMBARDI

The harder you work, the harder it is to quit.

What about your career will you miss most when you don’t have it anymore? What are the emotional riches your career has given you? How will you replace these rewards?

1. Employee Benefits Research Institute and Matthew Greenwald & Associates2010 Retirement Confidence Survey

1. Your Total HealthPhysical, mental and emotional health are vital for a fulfilling life, whether you’re working or retiring. Understanding the importance of your total health is the first step to maintaining it, and being able to enjoy retirement on your terms.

2. The Smile FactorWhat was it that put a smile on your face and had you bounding out of bed each morning? If you’re an entrepreneur and you’ve grown a business from scratch, you might find the same passion by mentoring the next generation in your line of work. Volunteer your gifts with a non-profit, or even begin a new career like nursing or the minis-try. Whatever motivated you in your career, start thinking about why it made you happy and brain-storm ways to find the joy work has given you.

3. A New GPSYour roadmap for your retirement years can be anything you want it to be. And the beauty is that if you change your mind, you can just calculate a new route. Think back – throughout your life. How did you answer the question, “If only I didn’t have to work, what would I be doing?” Where did you want to go? Now’s the time! Take small steps in whatever direction appeals to you – put your “map” in pencil, not in stone. The big commitments can come when you’re sure.

4. Having Enough Money. And Spending It. Of course you’ll need money, and by now you’re talking seriously about all your options. But remem-ber that you need the first three things on this list every bit as much as this one. How, exactly, will you pay for the retirement you envision? If you’re within 5-10 years of retirement, you should be thinking seriously about how you’ll use your money on a daily basis once you’ve left your primary career, not just about how much you’ll have saved by then.

4Pillars of a Happy Retirement

in order of importance! { }


Eddie, an avid golfer, couldn’t wait to retire, because then he could embark upon his second “career:” working as a groundskeeper at his favorite course, which would entitle him to free golf. Eddie drove to the pro shop the very day after his retirement party. “I’d like to apply for the groundskeeper position,” he said confidently, assuming that filling out the application was a mere formality. “Gosh, Eddie,” said the golf pro, “I’ve got no openings. In fact, I’ve got a waiting list. I guess lots of guys had the same idea…” Most Baby Boomers believe they are going to work part time in retirement, but, in fact, most of them won’t, for a number of reasons. Be realistic. Build your retirement blueprint to include part-time work as an option, not a necessity.

It’s about the best time of your life.What we talk about when we talk about money.



As you move from talking about your vision of the future to how you’ll afford it, there are several things to keep

in mind. You’re not just talking about money here; you’re making plans for an important and, hopefully, happy time of your life.

Financial “peace of mind” is four times more important than “accumulating as much wealth as possible” for people planning for retirement.

Age Wave/Harris Interactive Survey, January 2010

When discussing funding your retirement – as with any money conversation – emotions may run high. Clear a space – in your mind, on the table, in the day – and settle in to talk about funding what may be the best part of your life. You’ll both probably have strong opinions – expect that! You may need to negotiate, given that you may have different perspectives. But also expect that the same love and respect that got you to this point will get you happily to the other side of it.

Paying Yourself in RetirementHaving a steady flow of income or “payments to yourself” to sustain the lifestyle you envision – for your entire life – is a vital step in planning.

Here are three key ways to think of an income roadmap.

The first is, will you have enough income to live the life that makes you happy and confident as you retire?

Next, because we’re living longer and don’t want to be a financial burden to our families, will your money last your entire lifetime?

And finally, have you built protection into your income strategy? If you’re retired for 30 years or more, will your money keep pace with inflation? Is the income you’ll need to cover basic living expens-es protected from uncertain financial markets? Are you protecting part of your assets to “leave some-thing” to your children, or a favorite charity?

Talking through the need for an income roadmap, and what each of you wants to do through that map, is an important exercise.

Your Income Strategy Should Encompass a Host of Eventualities OUR PARENTS ARE L IVING LONGER, TOO.Since we’re living longer, many retirees today have living parents. For example, could one of you receive a bequest? As lovely as it is to be on the receiving end of a financial windfall, it can also cause stress. What would we do with it? What shall we buy? What shall we pay off?

EXPECTING THE UNEXPECTED.Discuss how you will deal with unexpected health care costs and diminished assets due to market volatility. Your roadmap should be designed to help protect you against any real damage – but, as we’ve seen over the course of the last several years, nothing is 100% certain.

WHAT ABOUT THE KIDS?Money for children and grandchildren will come up – a topic made more interesting by the fact that there may well be step-family members in your life. Consider how your extended family fits into the blueprint for your future.

THE “RETIREMENT EXPERIENCE” — VACATIONS AND MORE.As values have shifted throughout the first decade of the 21st century, we find that Americans are much more interested in experience than they are in material belongings.2 What will make up your retirement experi-ence? People used to think of retirement as a permanent vacation – but now, more than ever, couples are going on ‘green’ vacations to help restore endangered wetlands. Or they’re taking work-study trips that might include culinary school, or scholastic study of other times and cultures. Funding a fantastic retirement experience can be costly. Be realistic about where you can go, how often, and how much you can spend once you get there.

Getting Specific:What to Talk AboutMost families have a version of a financial plan, most typically a savings plan. And throughout your working years, you’ve probably talked about how much you want to have accumulated by the time you leave your primary career. But there’s a critical component to your retirement conversations that’s easy to overlook: your income. Your income strategy establishes how you’ll spend your savings in a way that lets you and your partner live the way you want to live – for as long as you live – in retirement.

1

2

3

In a recent AgeWave/Harris Interactive survey, respondents indicated that their

two biggest fears for retirement were about uninsured medical expenses and outliving their money due to living longer.For both situations, survey takers also stated emphatically that they did NOT want to turn to family or burden them with the responsibility for their care or their financial future.

2. BBDO “Right Sizing the American Dream” Study, 2009


How to match dreams to dollars: TheEssentialsvs.the“Nice-to-Haves.”

“The first step to getting the things you want in life is this: decide what you want.”- BEN STEIN

A good strategy for funding your retirement aspirations is to create two “buckets.” One for the things you need, and one for things you want.

STEP 1. Think through your essential expenses – everything you pay on a monthly, annual or semi-annu-al basis that is necessary to your well-being. These may include mortgage, utilities, food, insurance (auto, life, homeowner’s and medical), clothing, medicine, veterinary expenses, auto repairs. Include things like being able to take a class, or picking up the dinner tab now and then. It’s essential not to deprive yourself of anything that makes you who you are.

EXERCISE 1. Sit down with your spouse and think through your essential expenses. Here’s where the talking comes in. You and your partner may have very different ideas and definitions of “essential” expenses. You may think they’re things for your kids. Your husband may think they’re NASCAR pit passes. You may have to come to a common definition of “essential.” Once you’re there, make a list and a monthly/annual budget for the things you need.

STEP 2. Add up the income you know you’ll have in retirement: pensions, Social Security, and any other income you can truly count on.

STEP 3. Now subtract Figure 1 from Figure 2. Is there anything left over? If you find that the income you know you will receive in retirement is not enough to cover your essential expenses, you may want to discuss other ways to cover them, such as adding an annuity to your income roadmap, with the help of your financial advisor.

STEP 4. Estimate your discretionary expenses. Just as for your essential expenses, your plan for your “nice-to-haves” begins with a conversation, because partners may have different ideas of what’s “nice.” She might think it’s monthly 3-hour spa appointments; he might want chartered deep sea fishing trips. Your particular indulgences are important, and enjoying them in retirement often requires not only diligent planning for how to pay for them but also discipline in adhering to your strategy and making sure it has the flexibility to adapt to the changing needs in your life.

EXERCISE 2. Each partner lists the top five (more or less) “nice-to-haves” that they’ll require in retirement to be fully happy. Then negotiate a combined list that recognizes top priorities for each of you. From this “couple’s list,” estimate how much money each of you will require annually.

STEP 5. Look at your personal savings or other assets that have not been designated for essential expenses. This is money you can systematically draw from to pay for your “nice-to-haves.”

EXERCISE 3. Calculate how much you can spend for “nice-to-haves.” List all assets that will not be allocated to covering your essential expenses. Identify which ones you may want to use as a source for withdrawals to pay for your “nice-to-haves.” At a withdrawal rate of 3%, 4%, 5%, 6% a year, determine how much you might have to spend on the things you want and how long your savings may last. At what withdrawal rate can you afford your most important “nice-to-haves” and still have money to last through your retirement?


KnownIncomevs.EssentialExpenses

Add predictability to your retirement cash flow. An annuity is a financial product that can offer an income stream that is guaranteed for the rest of your life, no matter how long you live.

Typically, annuities are designed to provide you income for life and can be used to fill in gaps you may have in your guaranteed income.

They can be funded with a lump sum, such as money you’ve accu-mulated in a 401(k), inheritance, or IRA. Some annuities have features that allow you to designate a beneficiary, such as your spouse, to ensure a survivor continues to receive income.

There are no additional tax deferral benefits for annuities purchased in an IRA or any other tax-qualified plan, since these plans are already afforded tax-deferred status. Therefore, other benefits and costs should be carefully considered before purchasing an annuity in a tax-qualified plan.

Tip/Insight

1. Your Essential Expenses Housing Groceries Clothing Transportation Insurance Health care Utilities Other

4. Your Assets to Pay for “Nice-to-Haves”

Other retirement savings accounts (IRAs, 401(k))

Personal savings (CDs, mutual funds, stocks)

Deferred annuities Other income Other assets

3. Your “Nice-to-Haves”

Dining Out

Travel Fun Gifts to Others

Other

2. Your Known Income Social Security Pensions Income annuities Other


Different withdrawal rates, or the percentage of your savings that you use each year, will mean that your savings will last for different periods of time. For example, if you have $100,000 in personal savings and want to have $10,000 or 10% of your $100,000, each year for discretionary spending, you’ll have spent your savings in year #10. If you are retired for 30 years, how will you fund your discretionary expenses after year 10? Withdrawal percentages matter!

Part of the “art” of retirement income strategy is to match your withdrawal amount to how long you want the money to last.

Avoiding the subject of how you move on from your working life is only human.

It can be scary. It can be a real eye-opener. It can also be something that deepens your relationship in ways you never imagined. If you’ve been hesitant about this important conversation, the following is proof that it’s not just you!

» 70% of workers say they plan to work for pay after they retire; however, 40% of all retirees say they had to retire sooner than they planned, most often because of a health problem or disability, or a company downsizing or closure. 2

» Fewer than half (46%) of workers have calculated their retirement needs and have no idea how much they will have to save in order to live comfortably after retirement. 3

» 18% of couples have made a retirement plan and are executing it. Not surprisingly, they are happier than the 82% who have not.4

You don’t have to do this alone.

P R E - R E T I R E M E N T C O U R S E S E X I ST if you feel you need some extra assistance. Retirement is an exciting and new experience, kind of like visiting a beautiful foreign country. Sometimes a tour guide or a group excursion isn’t a bad thing.

S M A RT E R F I N A N C I A L P R O D U C T S There are plenty of financial products that can help with retirement planning. One such product, an annuity, can provide you guaranteed income for life and is an option you may want to consider. This option can go a long way toward achieving the ultimate goal: not outliving your money.

TIME TO CALL IN THE PROFESSIONALS? People who have worked at more than one company likely have more than one 401(k). This can lead to a false sense of security because the assumption is that if you have more than one fund, you are “diversified.” But if each of these accounts is invested in the same manner, a drop in the stock market or interest rates could affect them all. One idea that may give you more control and flexibility may be to roll your 401(k) plans into an IRA, where your financial professional, who has a good understanding of your investment goals, can take a good look and help you create a diversified portfolio.

People spend more time planning a two-week vacation than planning the last30 years of their lives.

3. Employee Benefits Research Institute and Matthew Greenwald & Associates 2010 Retirement Confidence Survey

4. Implications of the Financial Crisis for Long Run Retirement Security, Pension Research Council, 1/2010


Dear Jean,

Retirement is looming and we’re exhila-rated and scared in equal measure. We know how much Social Security we can count on, we’ve been saving for a long time, and we both have 401(k) plans. But we’ve watched friends’ retirement plans crumble due to the economy, and many of them are having to put off retirement altogether. We’d like to keep working – but the thought of having to work into our late 60s is so disappoint-ing. Is there some other way we can think about how much money we’ll re-ally need in retirement? Are there oth-er strategies to consider – rather than ‘working longer?’ Is there a way we can have more confidence that our savings will last? Are there things we should be thinking about that to help us feel more sure that the money we’ve saved all these years will be enough?

Mickey & Sylvia

Dear Jean:

My husband is the most generous per-son in the world! We’re starting to get serious about retirement and realize we won’t have the disposable income we’ve always had, which means my husband’s charming habit of always picking up the check might become a problem. I don’t know what to do, or even how to talk to him about it. I don’t see how we’ll be able to afford it. But the look on his face when he’s able to treat friends and family to dinner, drinks, movies…well, it would break his heart to have to stop. I know I’m lucky to be married to such a great guy. I don’t want to ask him to spend the rest of our lives not doing the thing he loves most. Is there a way we should be looking at this differently? Do you have any thoughts about how we can afford to have things that, while they may seem unnecessary – are important to the quality of our lives and inherently a part of who we are as individuals?

Roger’s wife.

Examples here are hypothetical and used for illustrative purposes.

© 2010 The New Yorker Collection from cartoonbank.com. All Rights Reserved.

© 2010 The New Yorker Collection from cartoonbank.com. All Rights Reserved.

Contemporary Retirement Counseling, “Couples Talking Retirement,” December, 2009

»61%ofcoupleshaddifferentideasaboutwherethebulkoftheirretirementmoneywouldcomefrom.Savings?Pensions?SocialSecurity?»Morethanhalfhavenotthoughtaboutwhowouldgivefinancialguidancetothesurvivingspouseiftheotherspousedied.»41%disagreedaboutwhetheroneorbothwouldworkduringretirement.»39%haddifferentideasonhowmuchlifeinsurancewassufficient.»Menthinktheyhavemoremoneythantheydo.»Womenthinktheyhavemoredebtthantheydo.»Theyboththinktheotherearnslessthantheysaytheydo…andthesearecoupleswhohavebeenmarriedanaverageof24years,withretirementaboutnineyearsaway.

MenandWomen:We’reDifferent!



“I think your whole life shows in your face, and you should be proud of that.”

The Let’s Talk Series is designed to help families think through important issues. Ask your financial professional for the Let’s Talk first edition about long term care conversations.

- LAUREN BACALL

The Genworth Financial family of companies helps millions of people achieve their dreams of financial independence, a comfortable retirement and protection for their loved ones.

For more information, visit our Web site: genworth.com/lets-talk

Annuities issued by:Genworth Life and Annuity Insurance Company, Richmond, VAGenworth Life Insurance Company, Richmond, VAGenworth Life Insurance Company of New York 666 Third Avenue, 9th Floor, New York, NY 10017Genworth Life and Annuity Insurance Company is licensed in all states except New York. Only Genworth Life Insurance Company of New York is licensed in New York.Capital Brokerage Corporation (DBA Genworth Financial Brokerage Corporation in Indiana) 6620 West Broad Street, Building 2, Richmond VA 23230. Member FINRA.Genworth Life and Annuity, Genworth Life of New York and Capital Brokerage Corporation are members of Genworth Financial, Inc.All guarantees are based on the claims-paying ability of the issuing insurance company.Variable Annuities are long term investments.Variable annuities are sold by prospectuses for the product and underlying investment portfolios. The prospectuses contain information on the investment objectives, risk factors, fees and charges, as well as other important information about the product and underlying investment portfolios, that should be carefully considered. Please read the prospectuses carefully before investing. You can obtain prospectuses by contacting your registered representative or by calling 888 GENWORTH.

Let’s TalkConversations that make a difference. Now and in your future.

The names used in scenarios have been changed. © 2010 Genworth Financial, Inc.

Insurance and annuity products:• Are not deposits. • Are not insured by the FDIC or any other federal

government agency.• May decrease in value. • Are not guaranteed by any bank or its affiliates.

Genworth, Genworth Financial and the Genworth logo are registered service marks of Genworth Financial, Inc.

Lets Talk - Genworth Financial...Getting Specific Afford the life you want INSIDE Let ’ s Talk...

Documents

Transcript of Lets Talk - Genworth Financial...Getting Specific Afford the life you want INSIDE Let ’ s Talk...