04/05/2015 HowtoProtectYourRetirementSavingsFidelity

https://www.fidelity.com/viewpoints/retirement/protectyourretirementincome?print=true 1/6

fidelity.com https://www.fidelity.com/viewpoints/retirement/protectyourretirementincome?print=true

Fivewaystoprotectyourretirementincome

Ifyourenearingorinretirement,itsimportanttothinkaboutprotectingwhatyou'vesavedandensuringthatyourincomeneedsaremetnowandinthefuture.Herearefiverulesofthumbtohelpmanagetheriskstoyourretirementincome.

1.Planforhealthcarecosts.

Withlongerlifespansandmedicalcoststhathistoricallyhaverisenfasterthangeneralinflationparticularlyforlongtermcaremanaginghealthcarecostscanbeacriticalchallengeforretirees.

AccordingtoFidelitysannualretireehealthcarecostsestimate,theaverage65yearoldcoupleretiringin2014willneedanestimated$220,000tocoverhealthcarecostsduringtheirretirement,andthatisjustusingaveragelifeexpectancydata.1Manypeoplewilllivelongerandhavehighercosts.Andthatcostdoesntincludelongtermcare(LTC)expenses.

AccordingtotheU.S.DepartmentofHealthandHumanServices,about70%ofthoseage65andolderwillrequiresometypeofLTCserviceseitherathome,inadultdaycare,inanassistedlivingfacility,orinatraditionalnursinghome.Theaverageprivatepaycostofanursinghomeisabout$90,000peryearaccordingtoMetLife,andexceeds$100,000insomestates.Assistedlivingfacilitiesaverage$3,477permonth.Hourlyhomecareagencyratesaverage$46foraMedicarecertifiedhomehealthaideand$19foralicensednonMedicarecertifiedhomehealthaide.

Consider:Purchaselongtermcareinsurance.Thecostisbasedonage,sotheearlieryoupurchaseapolicy,thelowertheannualpremiums,thoughthelongeryoullpotentiallybepayingforthem.

Ifyouarestillworkingandyouremployeroffersahealthsavingsaccount(HSA),youmaywanttotakeadvantageofit.AnHSAoffersatripletaxadvantage:Youcansavepretaxdollars,whichcangrowandbewithdrawnstateandfederaltaxfreeifusedforqualifiedmedicalexpensescurrentlyorinretirement.

2.Expecttolivelonger.

Asmedicaladvancescontinue,it'squitelikelythattodayshealthy65yearoldswilllivewellintotheir80soreven90s.Thismeansthere'sarealpossibilitythatyoumayneed30ormoreyearsofretirementincome.

AnAmericanmanwhosreachedage65ingoodhealthhasa50%chanceofliving20moreyears,toage85,anda25%chanceoflivingto92.Fora65yearoldAmericanwoman,thoseoddsrisetoa50%chanceoflivingtoage88andaoneinfourchanceoflivingto94.Theoddsthatatleastonememberofa65yearoldcouplewillliveto92are50%,andtheresa25%chanceatleastoneofthemwillreachage97.2Andrecentdatasuggestthatlongevityexpectationsmaycontinuetoincrease.

Youmaylivelongerthanyouexpect.

04/05/2015 HowtoProtectYourRetirementSavingsFidelity

https://www.fidelity.com/viewpoints/retirement/protectyourretirementincome?print=true 2/6

Peoplearelivinglongerbecausetheyrehealthy,active,andtakingbettercareofthemselves.

*Atleastonesurvivingindividual.Source:Annuity2000MortalityTable,SocietyofActuaries.Figuresassumethatindividualsareingoodhealth.Forillustrativepurposesonly.

Withoutsomethoughtfulplanning,youcouldeasilyoutliveyoursavingsandhavetorelysolelyonSocialSecurityforyourincome.AndwiththeaverageSocialSecuritybenefitbeingjustover$1,294amonth,itlikelywontcoverallyourneeds.3

Consider:Tocoveryourincomeneeds,particularlyyouressentialexpenses,youmaywanttousesomeofyourretirementsavingstopurchaseanannuity.Itwillhelpyoucreateasimpleandefficientstreamofincomepaymentsthatareguaranteedforaslongasyou(oryouandyourspouse)live.4

3.Bepreparedforinflation.

Inflationcaneatawayatthepurchasingpowerofyourmoneyovertime.Thisaffectsyourretirementincomebyincreasingthefuturecostsofgoodsandservices,therebyreducingthepurchasingpowerofyourincome.Evenarelativelylowinflationratecanhaveasignificantimpactonaretireespurchasingpower.Ourhypotheticalexamplebelowshowsthat$50,000todaywouldbeworthonly$30,477in25years,evenwitharelativelylow(2%)inflationrate.

Thedangerofinflation:Thevalueofyoursavingsisreduced.

Evenalowinflationratecanreducethepurchasingpowerofyourmoney.

Source:FidelityInvestments,2014.Allnumberswerecalculatedbasedonhypotheticalratesofinflationof

04/05/2015 HowtoProtectYourRetirementSavingsFidelity

https://www.fidelity.com/viewpoints/retirement/protectyourretirementincome?print=true 3/6

2%,3%,and4%(historicalaveragefrom1926to2013was3%)toshowtheeffectsofinflationovertimeactualratesmaybemoreorlessandwillvary.

Consider:Whilemanyfixedincomeinvestmentsandretirementincomesourceswillnotkeepupwithinflation,somesources,suchasSocialSecurity,andcertainpensionsandannuitiescanhelpyoucontendwithinflationautomaticallythroughannualcostoflivingadjustmentsormarketrelatedperformance.Investingininflationfightingsecurities,suchasgrowthorientedinvestments(e.g.,individualstocksorstockmutualfunds),TreasuryInflationProtectedSecurities(TIPS),andcommodities,mayalsomakesense.

4.Positioninvestmentsforgrowth.

Atooconservativeinvestmentstrategycanbejustasdangerousasatooaggressiveone.Itexposesyourportfoliototheerosiveeffectsofinflation,limitsthelongtermupsidepotentialthatdiversifiedstockinvestmentscanoffer,andcandiminishhowlongyourmoneymaylast.Ontheotherhand,beingtooaggressivecanmeanundueriskindownorvolatilemarkets.Astrategythatseekstokeepthegrowthpotentialforyourinvestmentswithouttoomuchriskmaybetheanswer.

Thesampletargetassetmixesbelowshowsomeassetallocationstrategiesthatblendstocks,bonds,andshortterminvestmentstoachievedifferentlevelsofriskandreturnpotential.Withretirementlikelytospan30yearsorso,youllwanttofindabalancebetweenriskandreturnpotential.

Findaninvestmentmixwiththerightamountofgrowthpotentialandriskforyou.

Withretirementlikelytospan30yearsorso,youllwanttofindabalancebetweengrowthandpreservation.

Thepurposeofthetargetassetmixesistoshowhowtargetassetmixesmaybecreatedwithdifferentriskandreturncharacteristicstohelpmeetyourgoals.Youshouldchooseyourowninvestmentsbasedonyourparticularobjectivesandsituation.Rememberthatyoucanchangehowyouraccountisinvested.Besureto

04/05/2015 HowtoProtectYourRetirementSavingsFidelity

https://www.fidelity.com/viewpoints/retirement/protectyourretirementincome?print=true 4/6

reviewyourdecisionsperiodicallytomakesuretheyarestillconsistentwithyourgoals.ThesetargetassetmixesweredevelopedbyStrategicAdvisers,Inc.,aregisteredinvestmentadviserandaFidelityInvestmentscompany,basedontheneedsofatypicalretirementplanparticipant.Datasource:IbbotsonAssociates,2014(19262014).Pastperformanceisnoguaranteeoffutureresults.Returnsincludedthereinvestmentofdividendsandotherearnings.

Thelowerthewithdrawalrate,thelongeraportfoliomaylast.

Pastperformanceisnoguaranteeoffutureresults.Theinformationprovidedregardingthehistoricalsustainabilityofvariouswithdrawalratesishypotheticalinnatureandisforillustrativepurposesonly.Itisnotintendedtopredictorprojectinvestmentresultsanddoesnotreflectactualresultsofanyinvestmentorinvestmentstrategy.Individualresultswillvary.The28yearretirementperiodisbasedonaretirementageof67andaunisexlongevityassumption.Balancedportfolio:50%stock,40%bonds,10%cash.Analysisusesoverlappinghistoricalperiods,whichlimitsstatisticalrelevance.Frequencyofsuccessuseshistoricalrealreturndataforwithdrawalperiodsbeginningeachmonth,withtheearliestperiodbeginningJanuary1,1926,andthelatestperiodendingJuly31,2013,usingahypotheticalbalancedinvestmentportfolio.Seefootnotefivebelowforinformationontheindexesusedforthebalancedportfolios.

Consider:Createadiversifiedportfoliothatincludesamixofstocks,bonds,andshortterminvestments,accordingtoyourrisktolerance,overallfinancialsituation,andinvestmenttimehorizon.Doingsomayhelpyouseekthegrowthyouneedwithouttakingonmoreriskthanyouarecomfortablewith.Diversificationandassetallocationdonotensureaprofitorguaranteeagainstloss.GethelpcreatinganappropriateinvestmentstrategywithPortfolioReview(loginrequired).

5.Don'twithdrawtoomuchfromsavings.

Spendingyoursavingstoorapidlycanalsoputyourretirementplanatrisk.Forthisreason,webelievethatretireesshouldconsiderusingconservativewithdrawalrates,particularlyforanymoneyneededforessentialexpenses.

Acommonruleofthumbistouseawithdrawalrateof4%to5%.Why?Weexaminedhistoricalinflationadjustedassetreturnsforahypotheticalbalancedinvestmentportfolioof50%stocks,40%bonds,and10%cash,todeterminehowlongvariouswithdrawalrateswouldhavelasted.Thecharttotherightshowswhatwefound:In90%ofhistoricalmarkets,a4%ratewouldhavelastedforatleast30years,whilein50%ofthehistoricalmarkets,a4%ratewouldhavebeensustainedformorethan40years.

Consider:Keepyourwithdrawalsasconservativeasyoucan.Lateron,ifyourexpensesdroporyourinvestmentportfoliogrows,youmaybeabletoraisethatrate.

Inconclusion

Afterspendingyearsbuildingyourretirementsavings,switchingtospendingthatmoneycanbestressful.Butitdoesn'thavetobethatwayifyoutakestepsleadinguptoandduringretirementtomanagethesefivekeyriskstoyourretirementincome,asoutlinedabove.

Learnmore

04/05/2015 HowtoProtectYourRetirementSavingsFidelity

https://www.fidelity.com/viewpoints/retirement/protectyourretirementincome?print=true 5/6

CreateacomprehensiveplantohelpmakeyourmoneylastwithourRetirementIncomePlanner(loginrequired).

DeveloparetirementincomestrategyusingtheFidelityIncomeStrategyEvaluatorSM(loginrequired).

Beforeinvesting,considerthefunds'investmentobjectives,risks,charges,andexpenses.ContactFidelityforaprospectusor,ifavailable,asummaryprospectuscontainingthisinformation.Readitcarefully.

Investinginvolvesrisk,includingriskofloss.

1.Source:FidelityBenefitsConsulting,2013.Basedonahypotheticalcoupleretiringin2012,65yearsorolder,withaverage(82male,85female)lifeexpectancies.Estimatesarecalculatedfor"average"retireesbutmaybemoreorlessdependingonactualhealthstatus,areaofresidence,andlongevity.AssumesindividualsdonothaveemployerprovidedretireehealthcarecoveragebutdoqualifyforMedicare.Thecalculationtakesintoaccountcostsharingprovisions(suchasdeductiblesandcoinsurance)associatedwithMedicarePartAandPartB(inpatientandoutpatientmedicalinsurance).ItalsoconsidersMedicarePartD(prescriptiondrugcoverage)premiumsandoutofpocketcosts,aswellascertainservicesexcludedbyMedicare.Theestimatedoesnotincludeotherhealthrelatedexpenses,suchasoverthecountermedications,mostdentalservices,andlongtermcare.

2.SocietyofActuariesIAM2000mortalitytables,updatedto2013withScheduleGAdjustments.Figuresassumeapersonisingoodhealth.

3.U.S.SocialSecurityAdministration,April2014.

4.Guaranteedlifetimeincomeissubjecttotheclaimspayingabilityoftheissuinginsurancecompany.

5.Forthebalancedportfolios,thefollowingindexeswereused.Fordomesticstocks,theIASBBIS&P500TR.Forforeignstocks,theMSCIEAFETR.Forbonds,theIASBBIU.S.IntermediateTermGovernmentTR.Forcash,theIASBBIU.S.30DayTreasuryBillTR.Thestockcomponentofeachportfolioincludes70%domesticand30%foreignstockfromJanuary1970toJuly2013.BecauseMSCIEAFEdataareavailableonlyfromJanuary1970,thestockcomponentbeforethattimewas100%domesticequity(S&P500TR).TR:Totalreturn.Assetclassreturnsreflectthereinvestmentofalldistributions.HistoricalinflationrateswerederivedfromtheIASBBIU.S.InflationIndex.Securitiesindexesarenotsubjecttofeesandexpensestypicallyassociatedwithinvestmentsinsecurities.Feesandotherexpenseswillreduceactualinvestmentreturns.

FidelityPortfolioReview,FidelityRetirementIncomePlannerandFidelityIncomeStrategyEvaluatorareeducationaltools.

TheS&P500Indexisamarketcapitalizationweightedindexof500commonstockschosenformarketsize,liquidity,andindustrygrouprepresentationtorepresentU.S.equityperformance.S&P500isaregisteredservicemarkofStandard&PoorsFinancialServicesLLC.

TheMSCIEurope,Australasia,FarEastIndex(EAFE)isanunmanaged,marketcapitalizationweightedindexdesignedtorepresenttheperformanceofdevelopedstockmarketsoutsidetheUnitedStatesandCanada.

TheIASBBIU.S.IntermediateTermGovernmentBondIndexisanunweightedindexthatmeasurestheperformanceoffiveyearmaturityU.S.Treasurybonds.Eachyear,aonebondportfoliocontainingtheshortestnoncallablebondhavingamaturityofnotlessthanfiveyearsisconstructed.

04/05/2015 HowtoProtectYourRetirementSavingsFidelity

https://www.fidelity.com/viewpoints/retirement/protectyourretirementincome?print=true 6/6

TheIASBBIU.S.30DayTreasuryBillIndexisanunweightedindexthatmeasurestheperformanceof30daymaturityU.S.Treasurybills.TheIASBBIU.S.InflationIndextracksU.S.inflation.

Votesaresubmittedvoluntarilybyindividualsandreflecttheirownopinionofthearticle'shelpfulness.Apercentagevalueforhelpfulnesswilldisplayonceasufficientnumberofvoteshavebeensubmitted.

FidelityBrokerageServicesLLC,MemberNYSE,SIPC,900SalemStreet,Smithfield,RI02917

550959.20.3