Retirement Essentials Winter 2016

VALIC®

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The subject of how much to save for the retirement lifestyle you want can sometimes seem complicated. It really doesn’t have to be that hard.

The general rule of thumb is to have 70% to 80% of your current income to live in retirement. Others may need more, or less. Gauging how much you’ll need depends on personal circumstances.

So how do you get started?Visit our online calculators at VALIC.com. Use the tools to help calculate how much your current lifestyle is costing each month. Be sure to list shelter, food, healthcare, clothing, utilities, transportation, outstanding debt … you get the picture.

Track your spending for several months. Be honest with yourself. This is your future.

Then go back to our tools at VALIC.com. The calculators will help determine how much you’ll need when you’re ready to stop working. With the calculators you can set different ages, and increase or decrease hypothetical savings rates … And don’t forget to factor in inflation. You can also see how your estimated Social Security benefits will play into your retirement income.

All in all, you can get a pretty realistic idea of where you are, and where you need to be.

Big or small, include it allIt’s easy to track, categorize and prioritize your expenses. If you’d like some help projecting your expenses into the future, ask your financial advisor.

How much will you need for retirement?Figuring it out may be easier than you think!

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RETIREMENT ESSENTIALS

QUICKLINKS:

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By the Numbers

Penny Wise

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

Money Talks

Make it easy on yourself: Consolidate accountsFree some brain cells to deal with other “life stuff”

Do you sometimes have a hard time keeping track of all the passwords, PINs, and UserNames you need to keep life running smoothly? Could be it’s time to simplify something, somewhere.

Consider streamlining your financial life.

Consolidating various accounts could help you better monitor the money you’re saving for life after work.

Consolidation can help you:

• Keep track of investment options and allocation among investment classes and categories

• Invest consistently toward a goal• Stay aware of your total savings and investments

What type of accounts might be good to consolidate?

• Workplace retirement plans with past employers — Check to see if the account charges a transfer fee

• Other old or inactive accounts• Various IRAsConsolidating simplifies your finances and might just help save you money because you’re paying fees on fewer accounts.

Consider your financial choices carefully, and if you don’t understand something ask for help. Consult your tax advisor. Your VALIC financial advisor can also explain the process.

Making Cents

Have tax questions?Tax time is right around the corner, which means you’ll soon start gathering your W-2s and other paperwork to file your taxes. Sometimes tax time can be daunting with lots of questions and uncertainty. Don’t let it get you down! Take a look at these resources to get help answering your questions.

Irs.gov Taxhelp.orgYou file your taxes with the Internal Revenue Service, so what better place to get your questions answered than the IRS website? There you’ll find a list of frequently asked tax questions, along with forms, publications and filing options.

Maybe you need a little extra help with your taxes. Check out taxhelp.org for answers to your tax questions, or to find a certified and reputable local accountant. You can search from a directory to find tax help in your area, or search by city and state. There are also sections specifically for students, seniors, self-employed or military veterans.

Transfers entireamount

Withholds 20% for IRS.Sends the rest to you.

Send distribution to new provider along with the 20% taken from your own funds — within 60 days — or face tax consequences

Tax consequencesA: If you don’t make up the withheld 20% from your own funds within 60 days, it will be considered taxable income for that year.

B: If you miss the 60-day limit altogether, the entire amount becomes taxable income. If the amount is large enough, it could push you into a higher tax bracket for that year.

A and B: If you are under age 59½, you can also incur a 10% federal early withdrawal penalty in addition to the other taxes due.

Direct Rollover

Indirect Rollover

No taxconsequences

Newprovider

Newprovider

You

Old provider

Old provider

Rolling over: Direct or indirect?When consolidating, how you roll your funds from one account to another matters — and could have tax consequences.

A 25-year-old with average salary of $40,560 contributes 10% of his annual salary to retirement savings and earns a 5% rate of return. At age 70, the accumulated value is $664,429

To reach that same $664,429 at age 70 and assuming the same rate of return

A 35-year-old with average salary of $49,972 would have to save 14%

A 45-year-old with average salary of $52,624 would have to save 26%

A 55-year-old with average salary of $53,508 would have to save 56%

10%14%26%56%

25 year old

35 year old

45 year old

55 year old

Yea

rs: S

tarti

ng to

save

and

reac

hing

age 7

0

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This hypothetical example assumes accumulated values based on 5% annual return rate. Shown salaries are based on U.S. Bureau of Labor Statistics data, 2015. Fees and charges are not reflected and, if included, would reduce the amounts shown.

Dollars & Sense

Measure your retirement readinessTime is your ally when starting to save for the retirement lifestyle you want. The earlier you begin socking money away, the easier it is … because compounding interest is part of the advantage.

Rising healthcare costs can sink retirement One good reason to save as much as you can for the future? Between 2005 and 2015, the estimated total cost for healthcare in retirement increased from $190,000 to $260,000. And could approach $300,000 in 10 years.1

• Only 39% of retirees surveyed in 2015 felt confident of having enough money to cover medical expenses in retirement2

• Medicare generally covers only about 60 percent of the cost of healthcare services for Medicare beneficiaries ages 65 and older

• Health issues often force workers to retire earlier than planned

Work longer? Don’t count on it• A report from the Center for Retirement

Research at Boston College found that about 37% of those working at age 58 retired earlier than planned3

• The Retirement Confidence Survey found that 50% of retirees leave the work force earlier than planned2

• 60% of those retiring earlier than planned did so because of health problems or disability2

By the Numbers

1 HealthView Services’ “2015 Retirement Health Care Cost Data Report”2 Employee Benefit Research Institute and Greenwald & Associates, 2015 Retirement Confidence Survey.3 Center for Retirement Research at Boston College, “What Causes Workers to Retire Before They Plan?”, September 2015.

Penny Wise

When you need help, start with your financial advisor

1 How can a financial advisor help you?

A Plan a budget to control spending and save money

B Look at your income needs for the future

CPlan for expenses like college, new home, business, retirement needs

D All of the above

2 How can you choose a financial advisor?

A Meet with candidates

BDetermine if you have special needs, and if the advisor is trained in the area

C All of the above

3 What should you do at a meeting?

ABring current financial information – latest balances on retirement plans, savings, paycheck stub, investments, insurance policies, etc.

B Talk about sports

CBegin with a conversation about your long-term goals, hopes, plans, etc.

D Leave your documents with the advisor and go home

Answers: 1. D. No matter where you are in life, a financial advisor can help determine the best saving and withdrawal strategy. Request a free

consultation.2. C. You can also research if the advisor is a Certified Financial Planner (CFP).3. A and C. Be prepared to start a strategy. Long-term goals can affect short-term goals. Your financial advisor can help you with both.

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 (01/2016) 97836 EE

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By the Numbers

Penny Wise