Retirement Essentials Summer 2015

VALIC®

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Don’t think you can save more? A little change goes a long way.It’s easy to talk yourself out of saving more because of obstacles like unexpected expenses or thinking you just can’t afford it. In reality, you can save more because a little change goes a long way.

Saving doesn’t have to be a complicated math formula. As part of a practical saving strategy, just look for small ways to change your spending habits, then add up the savings. You can afford to save more and when it comes to your future, more is better.

Still don’t think a little change goes a long way? Visit our Savings Goal calculator and plug in the numbers or talk with your financial advisor.

Remember, retirement isn’t a rainy day fund. With just a few tweaks to your spending habits, a plan and budget, you can add up the savings and help your retirement account grow faster. Keep the momentum building… because you deserve to live retirement on your terms.

* Assumes $15.86 weekly average on three items professionally cleaned; average 34 cents per item cleaned weekly using over-the-counter do-it-yourself kit for 52 weeks. Source: Dry Cleaning Prices HQ, 2015.

Here are a few easy ways to put away some extra savings for your retirement:

Use online bill pay with your bankSave on stamps and paper checks while keeping a closer eye on your balance. That will help avoid overdrafts.

Plan your meals and shop smartAlways know what’s for dinner and save money by planning meals around your grocery store sales flier.

Find a friend and carpoolCut your commute and auto maintenance expenses by sharing the drive and the ride.

Cut your energy bill with a programmable thermostat The latest generation thermostats can regulate the temperature in your home according to a schedule you preset … and some connect to WiFi so you can control it remotely. Now that’s cool.

And let’s talk real numbers Save a bundle on dry cleaning when you do it yourself at home. On average, it costs $15.86 to dry clean a two-piece suit and shirt. Snag a start-up kit and refills and get that fresh, clean scent at home for $1.02 – that could save you $771 a year.*

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Making Cents

Smart ways to get smarter about your moneyMany experts concur that one of the most important things people can do to help prepare better for their future is to increase their knowledge about money, budgeting, saving – improving financial literacy.

Here are some resources you can use for yourself, or with other family members. Practicalmoneyskills.com: This site, sponsored by VISA® in conjunction with a number of other financial services-related companies and non-profits, offers a wealth of information and resources for all life stages – from “Welcome to the Workforce” to “Retirement,” as well as “Money 101” for young people. It includes games, apps, calculators, videos and research resources.

MyMoney.gov/mymoneyfive: An example of your tax dollars at work, this site represents the efforts of 22 federal entities and offers a variety of free and expert information, including financial guides for planning for your first child, paying for college, buying your first home and preparing for retirement. MyMoney Five explains the five principles for managing and growing your money.

Khanacademy.org: This site offers free economic and financial lessons through an online classroom setting with a digital white board and video guides on several investing topics, including “Bonds vs. Stocks” and “Introduction to the Price-to-Earnings Ratio.”

Money Talks

Your account beneficiary designations could be more important than your will Recent changes to VALIC.com make beneficiary designations easier than ever

Remember the “pinky swears” — the silly promises you made to your friends back in grade school? What if someone came back to you decades later as an adult and expected you to abide by those promises? It’s unlikely they would ever prevail in a court of law. But if you designated someone as a beneficiary to your retirement account or other investment accounts, the law would abide by what you decided back then, no matter how many years ago. And a will, even if it were current and up to date, won’t help.

Beneficiaries can skip probateBeneficiaries specified on an investment-type account do not need to go through probate—the often lengthy and expensive court process that an estate goes through. In fact, life insurance, annuities, 401(k)s, pensions and IRAs can all be transferred via

beneficiary designation and outside of the domain of a will. This can help streamline the process of your beneficiaries receiving an inheritance should you pass away. It is also why it is critical to keep your beneficiaries on all your accounts up to date.

Keep your money with your loved onesYou don’t want to end up like one of the horror stories where the wrong person ends up with your financial legacy because you forgot to update a form. Updating beneficiaries is especially important for those who experience life changes in their families such as marriages, deaths, births and divorces. In general, beneficiaries are not legally required to be notified that they are a beneficiary or if there are changes to their status as a beneficiary.

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RETIREMENT ESSENTIALS

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Check out our delightful videos on saving and goals at VALIC.com.

Updating your VALIC accounts just got easierThe Beneficiary Designation section of VALIC.com recently received an upgrade to help streamline the designation process. The main change—a “Designee Profile” page—captures your beneficiary information and stores it on VALIC.com. This means you can select your designees from a drop-down menu instead of having to retype your personal information for each plan or account you have with VALIC. This upgrade is intended to enhance your online retirement planning experience as well as encourage you to protect your assets by designating a beneficiary through the simplified process.

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RETIREMENT ESSENTIALS

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0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

5 10 15 20 25 30

Acc

umul

ated

Ass

et V

alue

with Escalation vs without Escalation

To see the results, check out the chart.

Penny Percy

Penny: 1% annual contribution increasePercy: No contribution increase

“Why bother? What possible difference could 1% make? That’s chicken feed!”

“Once a year, I make a point of saving 1% more into my retirement account. It’s such a small amount, I don’t even miss it from my paycheck!”

Dollars & Sense

There seems to be a difference of opinion between Penny and Percy, two employees of Mercy Hospital.This chart compares the hypothetical results of contributing to a tax-deferred retirement plan at a 3% level, with and without a 1% annual contribution escalation. Assumes $35,000 annual salary, 25% tax bracket, 6% annual rate of return, 3% payroll reduction, annual automatic increase of 1% up to a 15% cap. Remember investing involves risk, including possible loss of principal. Fees and charges, if applicable, are not reflected in this example and would reduce the amount shown. Income taxes on tax-deferred accounts are payable upon withdrawal. Federal restrictions and a 10% federal early withdrawal penalty may apply to withdrawals prior to age 59½. This information is hypothetical and only an example. It does not reflect the return of any investment and is not a guarantee of future income.

* Source: “Annual Defined Contribution Survey,” International Foundation of Employee Benefit Plans and Deloitte Development LLC, 2014.

By the Numbers

The big potential behind a small change

Visualize a stack of one hundred $1 bills. Now, mentally take one of those dollar bills from the stack and set it aside, leaving you with 99 bills. Visually, the impact on the remaining stack would be virtually imperceptible; mathematically, it represents 1%. Big deal? Maybe!

If you can bring yourself to make a similar 1% commitment to increasing your retirement savings, the long-term growth has the potential to be significant — especially when you factor in the potential for compounding growth. Let’s look at a hypothetical illustration.

Hypothetical example for illustrative purposes only. This information does not reflect the return of any investment and is not a guarantee of future income. Assumes annual salary of $60,000 and monthly contributions, compounded at 5.5% annual rate of return. All investments involve risk including the possible loss of principal. Fees and charges, if applicable, are not reflected in this example and would reduce the amount shown. Income taxes on tax-deferred accounts are payable upon withdrawal. Federal restrictions and a 10% federal early withdrawal penalty may apply to withdrawals prior to age 59½.

5 Years

Assumes annual salary of $60,000 and monthly contributions, compounded at 5.5% annual rate of return.

5% Contribution

6% Contribution

That extra 1% could potentially grow to more than $21,000 extra savings over a 20-year period

10 Years 20 Years

What a difference a percent can make5% vs. 6% contribution rate over 20 years

$0

$30,000

$60,000

$90,000

$120,000

$150,000

Penny Wise

Start early and save moreEveryone likes an advantage. That’s why starting to save more of your salary earlier can make a big difference. Take our quiz and see why.

1 According to Albert Einstein, “the most powerful force in the universe” is compound interest. T F

2Some experts say that for every five years you wait to begin saving for retirement, you may need to double the amount you save each month to reach the same level of retirement income.

T F

3 I don’t need to adjust my saving contribution to compensate for inflation. T F

Answers: 1. True. Compounding interest is powerful, especially the longer you save. Compound interest occurs when accrued interest in turn

accrues interest itself. 2. True. Timing is everything. See a hypothetical example of the most opportune time in life to save and for how long. 3. False. Inflation diminishes the real annual rate of return on your investment … and reduces purchasing power over time. The more you

can contribute for a longer period allows your money to take better advantage of compounding interest. Use the U.S. Department of Labor inflation calculator to see the effect of inflation.

RETIREMENT ESSENTIALS

VALIC®

Investment values will fluctuate and there is no assurance that the objective of any fund will be achieved.Income taxes on tax-deferred accounts are payable upon withdrawal. Federal restrictions and a 10% federal early withdrawal penalty may apply to withdrawals prior to age 59½.This information is general in nature and may be subject to change. All companies mentioned, their employees, financial professionals and other representatives are not authorized to give legal, tax or accounting advice. Applicable laws and regulations are complex and subject to change. Any tax statements in this material are not intended to suggest the avoidance of U.S. federal, state or local tax penalties. For advice concerning your individual circumstances, consult a professional attorney, tax advisor or accountant.

Securities and investment advisory services offered through VALIC Financial Advisors, Inc., member FINRA, SIPC and an SEC-registered investment advisor.Annuities issued by The Variable Annuity Life Insurance Company. Variable annuities distributed by its affiliate, AIG Capital Services, Inc., member FINRA.VALIC represents The Variable Annuity Life Insurance Company and its subsidiaries, VALIC Financial Advisors, Inc. and VALIC Retirement Services Company. Copyright © The Variable Annuity Life Insurance Company. All rights reserved.

VC 20739 (07/2015) 96264 EE

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