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A magazine from WEA Member Benefits

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WINTER

Will your retirement plan last a lifetime? SE L IA C E

Investment spotlight: Mutual Funds 101

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Chances of living 25 or 30 years after retirement are higher than you think. Are you prepared for the long haul?

2016-17

your savings

The awesome power of compound interest

your insurance Five common home insurance mistakes

your kiosk

Use your IRA to help others


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CONTENTS WINTER 2016-17

3 YOUR ACCOUNT

- 2017 Prudential Guaranteed Rate announced. - Watch your mail for important information. - Myths about eligibility.

4 YOUR RETIREMENT

- Chances of living a long life are on your side. Your personal savings can be a key to a happier retirement.

6 SPECIAL FEATURE

- Investing can be intimidating. Our special section can help you evaluate and choose investments.

7 YOUR SAVINGS

- Jack and Jill help you understand the power of compound interest.

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8 YOUR INSURANCE

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- We’ve heard every one of these common home insurance mistakes.

- Health insurance isn’t the same as long-term care insurance. - New video resource available.

president’s letter Dave Kijek, President/CEO, WEA Member Benefits™

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10 YOUR KIOSK

- Did you know your IRA can help charity?

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Follow us. © 2017 WEA Member Benefit Trust. All rights reserved.

A little knowledge goes a long way

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I’m not sure I want to live to be 150 years old, but longevity experts say that the first person who will is already among us. Living longer means you need to be more strategic about saving for retirement. While there are challenges to face along the way, there is still plenty you can do to help build the retirement you’re hoping for. Saving earlier in your career makes a big difference (if you’re not convinced, see page 11), but it’s never too late to start. We can’t all be experts in everything, but having a base of knowledge on the important things like saving for retirement can help you make better

financial decisions. In this edition of your$ magazine, we’ve added a special section that can help you understand the basics about investments so you can plan and manage with confidence. Pull out the center pages to use or pass along…or just pass on the whole magazine. As you know, knowledge is power—and we hope you’ll share it with others. Speaking of investments, your home is likely one of the biggest financial investments you’ll make. Don’t put yourself at risk by making a costly insurance mistake. Every day we help Wisconsin public school employees review their current insurance and educate them on the appropriate coverage for their situation, whether they choose us or not. Read about the most common policy errors so you can avoid them too.

If you’re a younger educator, we have a new video with a link to some great resources that can help you get a head start on saving so you can reap the rewards of a long career. When it comes to financial security, we’re always here to help you gain the knowledge you need to protect yourself and your family. Happy new year!

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Myth Busters

IRA and 403(b) news

Common myths members hear about Member Benefits’ retirement and savings program

2017 Prudential Guaranteed Investment rate is 3.50%*

WEA Member Benefits™ is pleased to announce that the 2017 Prudential Guaranteed Investment credited annual rate of return for both the WEA TSA Trust and WEAC IRA programs will be 3.50%. The Prudential fact sheet and a Q&A regarding the current Prudential Guaranteed Investment contract is available online at weabenefits. com/pru.

Prudential Guaranteed Investment Annual Credited Rate

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1099-R coming in the mail

If you took a reportable distribution from your WEA TSA Trust 403(b) and/or WEAC IRA account(s) during 2016, we will send a 1099-R to the address on file on or before January 31, 2017. You will receive your 1099-R from our custodian, Mid Atlantic Trust Company.

Contribution limits remain the same

Annual contribution limits for the 403(b) and IRA retirement savings plans remain unchanged once again this year. The 2017 limit for the 403(b) is $18,000 and the age 50 and over catch-up is $6,000. For the IRA, the $5,500 limit remains the same, with the age 50 and over catch-up limit an additional $1,000 for a total of $6,500.

IRA participants: Watch for beneficiary information

If you have an IRA with Member Benefits, expect a letter from us reminding you to name your beneficiaries if you haven’t already done so. It’s also important to review your beneficiaries from time to time, especially when your circumstances change. Keep in mind, the beneficiaries on your retirement account may supercede what you may have in your will. Content in this magazine is for informational purposes only and is not intended to constitute legal, financial, or tax advice. Certain recommendations or guidelines may not be appropriate for everyone. Consult your personal advisor or attorney for advice specific to your unique circumstances before taking action. The Trustee Custodian for the WEAC IRA accounts is Newport Trust Company. The 403(b) retirement program is offered by the WEA TSA Trust. TSA program registered representatives are licensed through WEA Investment Services, Inc., member FINRA. *Interest is compounded daily to produce the current annual yield prior to the deduction of program administrative fees. Contributions and earnings are held in the general account of Prudential Retirement Insurance and Annuity Company (PRIAC). Principal and net credited interest are fully guaranteed by PRIAC. Such guarantees are based solely upon the financial strength and claims-paying ability of PRIAC. For more information go to weabenefits.com/pru.

Myth #1: You have to move your money out of WEA Member Benefits because... Despite what you might hear, you DO NOT need to move your money from your 403(b) or IRA with Member Benefits if you: • Retire or leave your job to take another job (even if it’s not in education). • Turn (insert any number) years old. • Move out of Wisconsin.

Myth #2: Consolidating your money will make it easier for your beneficiaries. Sure, consolidation makes managing your money easier, but unless you are consolidating into a low-cost program, your account balance could take a hit.

Myth #3: Your beneficiaries will not be able to stretch those proceeds over their lifetime.

Not true! Your beneficiaries can keep any inherited account here as long as they like, take their required minimum distributions, and enjoy our low administrative fee and annual fee cap. (Subject to applicable legal/tax requirements. These accounts would be subject to the risks associated with the investments in the account.)

Myth #4: You won’t have access to your 403(b) funds in retirement because it is in an “annuity” (taxsheltered annuity).

Our program has flexible withdrawal options without surrender periods (the amount of time an investor must wait before withdrawing funds from an annuity without penalty). Often individual annuities or insurance company annuities have surrender/maturity periods that are many years long (sometimes 5–12 years). Ours doesn’t.

Myth #5: There are fees to get funds out of your account upon retirement.

{ WHAT’S ON YOUR MIND? Do you have a story to tell, a question, or an article suggestion? Send an e-mail to memberbenefits@weabenefits.com. Type “your$” into the subject line.

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Nope! Member Benefits does not charge transactional fees or surrender charges even if you move your money out. (Mutual fund management and redemption fees apply.)

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{ your retirement

LONGE Will your retirement What do you think the chances are you’ll live to age 75? 85? How about 90? It’s higher than you think. How would your plans for retirement change if you knew you were going to live to 100? When planning for your retirement years, you’ll be better prepared if you understand the role life expectancy should play on your savings decisions. It’s an astonishing fact: The first humans expected to live to age 150 are already alive, according to experts on aging and longevity. Astonishing or not, longer life is forcing many people to rethink how (and how long) they work and focus more on increasing the quality of these longer lives rather than rushing to retirement in their relatively spry 60s. Americans tend to underestimate their life expectancy. According to the Employee Benefit Research Institutes’ 2016 Retirement Confidence Survey, only 37% workers think they will live to age 85. However, the probability of a 65-year-old in the U.S. living to age 85 is 50%.1 The chances of living 20, 25, or 30 years after retirement are pretty high. Living longer means more money is needed—more than any prior generation. And part of the happiness enjoyed in retirement includes the ability to afford the things you need as well as what you’d like to do. While saving for retirement can have its challenges, there are many things you can do today that can make a real difference to your (potentially very long) future.

Perception vs. reality Short-term thinking

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According to John E. Nelson, coauthor of the book What Color Is Your Parachute? For Retirement, the potential impact longevity has on retirement is not something most people plan for.

“The challenges of longevity don’t feel real to people, so they tend to make decisions that don’t recognize the potential of a long life,” says John. “It’s not that they don’t understand the idea they may live a long time, it’s just that it doesn’t feel real.

“The challenges of longevity don’t feel real to people...so it’s hard to get them to save.” “Very rarely do people make decisions that compromise their goals for the next 10 years. So it’s hard to get people to save for a potentially long life because they don’t want to give up something in the more “real” future for some more vague, farther off time,” he explains. Change of plans

Chances are good you may be forced to retire earlier than you had planned. There is a considerable gap between when workers expect to retire and their actual experience. For example, only 9% of workers said they plan to retire before age 60, but 36% actually did. Sixteen percent had plans to retire between 60– 64, but 29% actually did. Many Americans actually find themselves retiring unexpectedly—a whopping 50% leave earlier than planned. The top two reasons are health problems or disability (60%) and company downsizing or closure

(27%)2...two things you don’t necessarily have control over. If this happens to you, you’ll have more years to support yourself in retirement and less time to prepare for it financially. Underestimating health care costs The vast majority of people significantly underestimate the real costs of both acute care and long-term care. In an Employee Benefit Advisers survey, nearly half of people surveyed believe their total health care costs will not exceed $50,000 in retirement. However, according to Medicare, a 65-year-old couple retiring today will pay an average of $8,246.16 in annual premiums for Medicare Part B, Part D, and a MediGap policy. Long-term care costs, which are not covered by Medicare, can be from $40,000 to $80,000 per year. The reality is that these type of costs can deliver a very big hit depending on your level of health and number of years in retirement. (See page 14 for more longterm care coverage information.)

Financial challenges Life happens

First, the good news: Workers of all ages are saving more today than just three years ago. The largest jump was for Millennials aged 25-34, who are saving a median of 7.5% of their pay (including matching contributions) toward retirement, up from 5.8%. However, life has a way of putting pressure on savings contributions as time marches on. Competing priorities weabenefits.com


EVITY plan last a lifetime? such as tackling debt, saving for childrens’ education, caring for a parent, and other living expenses often have a negative impact on retirement savings. Only 37% of Americans report they can live comfortably and still save enough for retirement. Nearly one-third (32%) report that, in the past 12 months, they have withdrawn money from retirement savings to make ends meet.3 Even more concerning, 45% of working-age households and 41% of near-retirement households have saved exactly…zero.4 The uncertain future of Social Security

Currently, over one-third of retired workers use Social Security for 90% of their income, and 24% used it as their sole source of income in 2014. However, the current estimated benefit for all retired workers is just $1,341 a month, which is just slightly over $16,000 a year. For the past 25 years there have been about 3.3 workers per Social Security beneficiary. After 2030, the ratio will be only two workers per beneficiary. To meet the increased need, substantial change will be needed. It is uncertain exactly what that change will be and how it will affect future benefits.5 Lack of financial knowledge

According to a 2016 National Financial Capability Study, only 37% of respondents were considered to have high financial literacy, meaning they could answer four or more questions out

of five on a financial literacy quiz. Financial education is not widely available. Only 31% of respondents said they were offered financial education during their lifetime, and only 44% had parents or guardians that helped them. Fortunately, as an educator, you have information and resources available to you through Member Benefits, including free seminars, access to personal consultations, and financial planning services to help you build your financial knowledge.

The importance of personal savings Wisconsin public school employees have a distinct advantage for their retirement by having Wisconsin Retirement System (WRS) benefits. For many people, if your WRS benefit is based on a full career and you take Social Security (regardless of what age you start), it can be enough to cover the basics. But even if you retire with a long career in education behind you, it will be important to have additional savings from a 403(b) and/or IRA. You may not have considered that without additional personal savings in retirement: • You may be limited as to what you can afford to do, depending on your lifestyle goals

(travel, social activities, eating out, hobbies, etc.). • If you retire early, you’ll need to pay for health care insurance until you qualify for Medicare, which could be a financial challenge. You may also have more difficulty paying for health care expenses during your retirement years. • You may have to work during retirement instead of volunteering or doing other things you want to do. And the farther you are from retirement, the more things can change. For example, with everyone living longer, and 10,000 more boomers retiring every day—83.1 million boomers by 2050— the notion of Social Security being available to everyone grows slimmer. Millennials and younger generations will likely need to think about retirement differently—for example, relying less on Social Security benefits or working longer. However, the advantage of youth is that if you start saving and planning Continued on page 6

The number of people over age 90 in the U.S. is predicted to almost quadruple in the next 34 years. Source: U.S. Census Bureau.

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Centers for Disease Control, United States Life Tables, 2012, published November 28, 2016. 2 Employee Benefit Research Institute, Issue Brief, “2015 Retirement Confidence Survey.” 3 Planadviser, “A Rising Tide Benefits Advisers,” January 27, 2016. 4 National Institute on Retirement Security, “The Continuing Retirement Savings Crisis,” 2015 Study. 5 Social Security Administration, ssa.gov 1

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Continued from page 5

now, you have time on your side to prepare more adequately. You may benefit from the compound interest that has the potential to accumulate in your personal account over time.

Whether you’re 20 or 50, you need to make a plan Now that you’re thinking about longevity and how it might affect your retirement planning, it may seem overwhelming to try and meet every contingency that could happen over a potentially long lifespan. And that may not be realistic for many people. But don’t get discouraged. There are plenty of things you can do during the years before retirement that can help maximize what you’re able to save. Make saving a priority. It’s a balancing act to prioritize day to day versus long-term spending. Track your expenses and use a budget to help balance out your financial obligations so you can make saving for retirement a priority. Using automated services such as payroll deduction or ACH make it even easier. Open a 403(b) and/or IRA. Your personal retirement savings can help you fill financial shortfalls not covered by WRS and Social Security. In fact, personal savings makes up about 22%– 46% of retirement income for most Wisconsin public school employees. Not only are retirees living longer, but they are more active in retirement than ever before—so personal savings is becoming increasingly important. The earlier you start saving, the better—but it’s never too late to start. Take the match. Always take advantage of your employer’s match program if it’s offered. It’s money you’re entitled to and will boost your savings. Escalate your savings. Actively adjusting the amount you contribute can really add up. For example, every year or every time you get a raise or eliminate a debt, bump up your retirement savings contribution by adding another percentage or increasing your dollar amount. If you’re age 50 and up, you can weabenefits.com also elect to make additional catch-up contributions to your 403(b) and/or IRA accounts.

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Special considerations for women • Women tend to live longer than men and are more likely to suffer from chronic illness, so they are often on their own later in life and spend more on health care. • Women are 80% more likely than men to be impoverished at age 65 and older.1 • In 2015, female full-time workers made only 80 cents to every dollar earned by men—a 20 percent gender wage gap.2 • Because women often take time off to have children and/ or care for aging parents, they receive fewer salary increases compared with men.

What should women do to maximize their retirement savings? Start saving sooner. See page 11 to understand the power that compound interest can have on your savings over time. Contribute more. On average, men work 38 years and women 29 years, so women should save a higher percentage of their salary. Educate yourself. Stay engaged—know what accounts you have, what your monthly expenses are, and how much you’re saving. Take advantage of workplace education and free financial seminars offered by Member Benefits. Or schedule a free financial consultation by calling 1-800-279-4030. 1

Consolidate accounts. As you move through your career, you may accumulate accounts in old workplace plans. Find out what fees you’re paying, if there are any surrender charges, and other items such as contingent deferred sales charges to find out if consolidating is right for you. Consolidating also makes it easier to manage. Understand and balance out your risk. Once you’re retired, you will need to actively monitor your accounts and make good budgetary decisions to mitigate risk so that your savings will last. Some future risks you’ll be facing include: Inflation risk: Inflation can reduce purchasing power, create market volatility, and devalue your income. Replacement income risk: Your income stream can decrease as a result of a drop in interest rates. Withdrawal rate risk: You’ll need to evaluate how much you can withdraw over a certain period of time without depleting your savings to zero. Sequence of return risk: This is the risk of receiving lower returns early on in a time when withdrawals are being made; for example, at the beginning of retirement.

National Institute on Retirement Security, March 2016. 2 Institute for Women’s Policy Research, iwpr.org.

You have the advantage You have a distinct advantage by being a Wisconsin public school employee—you can get help with personalized financial planning from Member Benefits. We offer a free onehour consultation as well as paid services to help you know what you’re getting from WRS, Social Security, and your savings, and to help you create a game plan so you can meet your financial goals and enjoy retirement. Visit weabenefits.com/financialplanning for more information. All investment advisory services are offered through WEA Financial Advisors, Inc.

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Investment spotlight MUTUAL FUNDS 101 YOU DON’T NEED TO BE A GENIUS TO INVEST LIKE ONE. EVERY SUCCESSFUL INVESTOR STARTS WITH THE BASICS. CONTINUED FROM YOUR$ FALL ISSUE

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nowing how to secure your financial well-being is one of the most important things you’ll ever need to do in life. You don’t have to be a genius to do it. You just need to know a few basics, form a plan, and commit to it. No matter how much or little money you have, it’s important to educate yourself about your opportunities and—this is critical—take appropriate action. Because knowledge alone will not change your outcome.

Clearing the roadblocks For many, the idea of choosing investments prevents them from taking advantage of savings opportunities. Eric Schwartz, CFP® and Financial Planner at WEA Member Benefits says, “Investing can seem overly complicated when you don’t know where to begin or how to evaluate investment options. Remember, no one is born knowing how to invest.” Every successful investor starts with the basics—the information you’re about to read. Of course, there is no guarantee that you’ll make money from investments you make. But if you get the facts about saving and investing and follow through with a thoughtful plan, you should be able to gain financial security over the years.

Investing: The lesser of two risks While investing does carry its own set of risks, not investing carries risk as well—the risk of not having enough money in retirement to live comfortably. “It’s a bit of a catch 22,” says Eric. “The only way for most people to attain financial security is to save and invest over a long period of time. Few people stumble into financial security.” The good news is there are ways to manage the risks associated with investing. It is often said that the greater the risk, the greater the potential reward in investing, but taking on unnecessary risk is often avoidable. Diversification* is an investment strategy that can be neatly summed up as, “Don’t put all your eggs in one basket.” In other words, spreading your money out over investment categories—large-, mid, small-cap, etc.—may reduce overall risk of loss and others may have gains, because while some investments are down, others are up.

if you will be able to sleep at night if you purchase investments where you could suffer losses to your principal.” Making the right investment choices for you depends on two things, according to Eric. “One, you need to know the basics about investments. And two, you need to know what kind of investor you are.” The pie charts in this special section are examples of how investment dollars could be allocated to the different fund categories to create diversified portfolios for five different types of investors. Plus, we’ve defined the categories and matched up the fund options available from Member Benefits. Make sure to find out where you fall on the investor spectrum (from conservative to aggressive). Simply go to weabenefits.com/riskcalc and answer 12 questions. If you’re still uncomfortable with the thought of investing, give us a call and set up a meeting with one of our financial planners at 1-800-279-4030.

The million dollar question What are the best investments for me? The answer, says Eric, “depends on when you will need the money, your goals, and *Diversification does not protect against losses or assure a profit.

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Fund categ Fund category: Small-Cap

Mid-Cap St

Stock Funds

Risk/return trade-off: Believed to be riskier than both mid-

cap and large-cap stocks with generally higher growth potential. Holdings: Invests primarily in small company stocks with less than $2 billion in shares outstanding (meaning number of shares held by investors). Our Small-Cap Stock Funds • Prudential QMA Small-Cap Value Z Fund • Vanguard Small-Cap Index (Institutional Shares) • ClearBridge Small-Cap Growth Fund

Fund category: International

Holdings: Invests primarily in the stock of non-U.S. companies in

developed and/or developing (emerging) markets.

Our mutual funds representing developed markets: • Fidelity Diversified International • Vanguard Total International Stock Index

Mid-cap stock greater growth more mature b less risk and v cap companies Holdings: I stocks of medi from $2 billion shares outstan Our Mid-Cap S • T. Rowe Pr • T. Rowe Pr • Vanguard M

Stock Funds

Risk/return trade-off: Higher risk, higher return.

Developed Markets: Mature economies characterized by more stability than developing markets.

Risk/retur

While mutual funds primarily invest in und category, they may also invest in holdings prospectus for a complete list of fund hold

Developing (Emerging) Markets: Generally more volatile than developed markets. Characterized by rapid economic expansion, emerging middle class, industrialization, and low labor costs. Our mutual funds representing developing markets: • Oppenheimer Developing Markets • Vanguard Total International Stock Index

10% 15% 10%

25% Conservative

Moderately Conservative

For investors with very low tolerance for risk and/or retired or nearing retirement. Stresses safety of principal and interest with limited investment in riskier areas.

For moderately conservative investors who are willing to take some risk, but still need a sizeable “anchor” of safety.

7% 10% 8%

9% 12% 60%

9%

15% 20%

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50%

Moderate

This investor has a low to moder reasonable, but relatively stable modest fluctuations in the yearsome time to recover from any m

Fixed income Large-cap stock funds Mid-cap stock funds International equity fun Small-cap stock funds

This is for informational purposes only and is not intended to constitute legal, financial, or tax advice. Certain recommendations or guidelines may not be approp fund investments are not guaranteed and may gain or lose value. Past performance is no guarantee for future results. Future performance may be lower or high carefully and consider the fund’s investment objectives, risks, and charges and expenses before investing. The prospectus contains this and other information ab

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Fund category: Large-Cap

gory:

tock Funds

rn trade-off:

ks may offer investors h potential than larger, businesses but with volatility than smaller s. Invest primarily in the ium sized companies n and $10 billion in nding. Stock Funds rice Mid-Cap Growth rice Mid-Cap Value Mid-Cap Index

Risk/return trade-off: Large-cap stocks tend to be less volatile than mid- or small-cap stocks but often offer lower long-term growth potential. Holdings: Large-cap funds are mutual funds that primarily purchase the stock of large companies that generally have at least $5 billion in shares of stock outstanding. Our Large-Cap Funds • T. Rowe Price Growth Stock • Fidelity Contrafund • Parnassus Core Equity Fund • T. Rowe Price Equity Income • Vanguard Institutional Index

Fund category: Fixed

derlying holdings that reflect their stated from other categories. Please refer to the dings.

40%

Stock Funds

income

Risk/return trade-off: Low risk, low return. Holdings: Commercial mortgages, private placement bonds,

publicly traded debt instruments, and asset-backed securities. Objective: To maximize the long-term rate of return and provide current income consistent with preservation of principal. Our Prudential Guaranteed Investment specifically guarantees principal invested and interest paid on that principal. The Pioneer Bond fund seeks to provide current income using a prudent investment approach; however, returns and principal are not guaranteed. Our fixed income options: Prudential Guaranteed Investment* and Pioneer Bond Fund Class K. *Interest is compounded daily to produce the current annual yield prior to the deduction of program administrative fees. Contributions and earnings are held in the general account of Prudential Retirement Insurance and Annuity Company (PRIAC). Principal and net credited interest are fully guaranteed by PRIAC. Such guarantees are based solely upon the financial strength and claims-paying ability of PRIAC. For more information go to weabenefits.com/pru.

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rate risk tolerance and wants e growth, is comfortable with -to-year portfolio value, and has market downturns.

nds

40% 25% 10% 15% 10%

Moderately Aggressive

Aggressive

For investors who find high levels of risk acceptable in seeking out potentially higher returns.

For investors who have a long timeline or won’t lose sleep over high levels of risk. This allocation mix offers the greatest potential for growth but also the greatest risk.

14%

25%

17% 14%

15% 20%

30%

10%

40%

15%

priate for everyone. Consult your personal advisor or attorney for advice specific to your unique circumstances before taking action. Keep in mind that mutual her than past performance. Before investing in any mutual fund, call WEA Member Benefits at 1-800-279-4030 to request a prospectus. We advise you to read it bout the investment company.

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What’s next?

Apply what you’ve learned to start investing in your future or evaluate your current investments. 1. Take the risk profile quiz so you know what kind of investor you are (conservative, moderate, aggressive, or somewhere in between). NOTE: This is not just for those new to investing. As we move closer to retirement or have life-changing events, our risk profile often changes. Your investments need to fall in line with your tolerance for risk. 2. Choose an investment approach. Decide how involved you want to be in managing your investments. With Member Benefits, you have three options. You can choose to invest in Model Portfolios, Target Retirement Funds (see right for descriptions), or take the “do it yourself ” (DIY) route. Go to weabenefits.com/enroll403b or weabenefits.com/enrollira. Our online enrollment section will guide you through the process and provide more insights into investing.

ONE-DECISION INVESTING. TWO OPTIONS. WHAT IS A MODEL PORTFOLIO? A Model Portfolio is a predefined portfolio based on your risk tolerance.

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WHY WOULD I CHOOSE TO INVEST IN A MODEL PORTFOLIO? Model Portfolios can help you achieve your personal investment goals by placing you in one of five predefined portfolios based on the results of your Risk Profile Assessment. Model Portfolios give you the ability to hold a personalized portfolio that matches your risk tolerance rather than your age. You don’t need to spend a ton of time selecting and managing individual investments. WHAT INVESTMENTS MAKE UP THE MODEL PORTFOLIOS? The investments that make up the Model Portfolios are selected from prescreened mutual funds offered by Member Benefits.

3. Select your investments. If you choose the Model Portfolio option, you will choose a portfolio with preselected/pre-screened funds that match your risk tolerance. And you are done. If you decide Target Retirement Funds are right for you, choose the fund closest to your projected retirement year. And you are done. If you choose to DIY... 1. Match your investment profile to an appropriate allocation. Use the pie chart that corresponds to your risk profile for guidance. 2. Review the funds in each investment class. You should consider your preference for active or passive management, the fund objective, expense ratio (keep them as low as you can), performance history, and top holdings. This is easily done by using the prospectus and/or Morningstar analysis (available online at weabenefits.com/investments). Both are very useful tools for evaluating funds. 3. Identify one or more within each asset category that appeals to you. 4. Assign a percentage to each fund that interests you. For example, if your asset allocation pie chart suggests 15% of your contribution go to International Equity funds and you have identified three funds from that category, you may give each of the funds 5% of that slice of the pie (or any combination) to total 15%. Continue the process until you have all slices of your pie accounted for and your percentages added together equal 100%.

WHAT ARE TARGET RETIREMENT FUNDS? A target retirement fund is a mutual fund designed with a specific retirement year in mind. Investors can pick a target retirement fund based on the year they plan to begin taking distributions and let a professional manager do the rest.

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For example, if you are currently age 36 and would like to retire at age 65, you can invest in a 2045 Target Retirement Fund. As the fund approaches the target retirement year, the fund allocation becomes more conservative, meaning investment allocations switch to more fixedincome investments to decrease risk and preserve capital. Target retirement funds invest in a mix of stock and bond funds that steadily become more conservative as they approach their target date. The principal value of a target retirement fund is not guaranteed and may gain or lose value now and after its target date.

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Investment models are not FDIC-insured, and they are not bank-guaranteed. Investment models may lose value. Past performance is no guarantee of future results. Model performance returns illustrate the relationship between risk and reward. The WEA Member Benefits model portfolios are risk-based. The more conservative the underlying asset weightings are, the lower the expected rate of return. Because of market changes, the makeup of your actual account portfolio will not exactly match the model portfolio. We may perform periodic adjustments of the model portfolio investments and rebalancing of your account to more closely match the model portfolio you select. Model portfolios are developed by WEA Financial Advisors, Inc., (WEA FA) under the oversight of the WEA Member Benefits Investment Committee. Model portfolios may be adjusted at the discretion of WEA FA and the Investment Committee with prior notice to you. From time-to-time there may be extraordinary situations that will warrant more scrutiny when making adjustments. An example is the market downturn in October 2008. Although WEA FA carefully evaluates the makeup of the portfolios on a regular basis, we make no representation regarding the likelihood or probability that any or all of the portfolios will in fact achieve a particular investment goal or fulfill the risk tolerance profile as described for each portfolio. As a self-directed investor, you should carefully consider the merit and appropriateness of the available investments under your district’s retirement plan in light of your own personal financial circumstances, including your other assets, income, investments, and/or cash flow needs. Re-Assess Your Investment Needs Regularly: Because your needs, goals, portfolio, and situation may change over time, be sure to re-evaluate your investment strategy at least once a year. You can always choose a different model or create your own mix. Redemption fees may apply. When participating in a WEA Member Benefits model portfolio, you must complete the Risk Profile Questionnaire every three years. You may not continue to use the model portfolio option if you do not timely complete a Risk Profile Questionnaire. In such an event, and if we receive no other instruction from you, your plan assets will be moved to your plan’s QDIA (qualified default investment alternative).

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{ your savings

$50 per pay period

Are you Jack or Jill? I’m Jack. I’m Jill.

Smart Jill socks $50 a pay period (24 times a year) into her retirement account right away.

I pay myself first.

At Jill Jack Age Saves Waits 22 23 24 25 26 27 28 29 30 31

$1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0

$50 per rep 05$ pay perioddoirep yap

It’s too early to plan for retirement.

Tardy Jack waits 10 years.

They start out as equals: same school, same job, same salary.

L

ook at what happens.* Jill’s contributions in the first 10 years—totaling $12,000—grows to $103,530 by age 55 even if she stops contributing at age 32. Jack, who just begins investing at age 32, contributes $28,800 over 24 years, but his account value at age 55 is still less than Jill’s. Jack contributed more money and still doesn’t catch up with Jill…all because he procrastinated.

The story of Jack and Jill illustrates the power of compounding interest or the time value of money. *Your actual situation may be different from the value shown here. This example uses a projected earning rate of 7.5% for illustrative purposes only. No guarantees are expressed or implied. Results will vary depending upon the actual rate used in the calculation. Over time, the results of any investment will fluctuate and are not guaranteed.

I should’ve started saving sooner.

Start your career on the right financial foot! Pay yourself first

Automatic contributions to a 403(b) or IRA make it easy.

Build a budget

A budget helps you set priorities, save for things you want, and gives you permission to spend.

Jack

If Jill If Jill finally stops continues starts 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55

$0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

$1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200

$1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200 $1,200

$103,530 $183,902 $80,373 p Total Values

Watch fees

Keeping fees low means more of your money is working for you.

Jill went up the hill to fetch an early retirement. But Jack started later, so the cost was much greater and he saved all the way til the end!Take a lesson from Jack and Jill.

weabenefits.com

be Don’t k c Ja .

Be Jill.

11 11


{ your insurance

5 mistakes people make

when insuring their home

D’OH!

Plus, real examples of really bad insurance policies uncovered by our consultants Underinsuring your home Tim Ganoung

1. If your home was destroyed

by fire, would you have enough insurance coverage to replace it? Not having adequate coverage to rebuild is one of the most common mistakes homeowners make—and potentially the most costly. Whether it is due to a lack of awareness or an intentional strategy to save money on premium, the potential financial risk is significant. During a recent insurance evaluation, I saw that the person’s primary home policy (with another provider) was written with a coverage limit of $108,000. Our reconstruction cost calculation for the home was $222,000, so they were currently insured at only 49% of the value. The homeowner would be on the hook for 51% of the cost, or $114,000, to rebuild the home. In this case, this situation would invoke the co-insurance clause in the contract—even on a smaller claim. For example, let’s assume they have a $500 deductible and needed to replace their roof due to hail damage. If the cost for a new roof was $10,000, the insured would only receive $4,900 for this claim because of the co-insurance penalty resulting from underinsuring

12

the structure. Insurance is meant to protect against the catastrophic financial loss—losses that would be damaging to your family finances. Don’t sacrifice coverage on your biggest investment to save a few bucks on your premium. A better way to save is to consider increasing your deductible and making sure you have the right coverages.

Confusing market or assessed value with the cost to rebuild Steve Schofield

2.

There is a fair amount of confusion between a home’s replacement cost, market value, and assessed value, and which value to use when purchasing coverage for your home. These values are usually not the same and serve different purposes. Replacement cost is how much it would cost to rebuild your house in the same spot with materials of like kind and quality. Market value is how much you could expect to get for your home in the current real estate market if you were to sell. Assessed value is the dollar amount placed on your home by your local

government for taxation purposes. The higher the assessed value, the more you pay in taxes. Your home’s location, condition, land value, and the selling prices of comparable properties, among other things, may be factored into market and assessed values. When there is a big change in the housing market, especially if the values drop like they did during the 2008 recession, homeowners mistakenly think they can reduce their coverage. The problem is that the cost to rebuild their home in the event of a fire or other loss doesn’t go down (or up) with market value. The prices of labor and materials don’t necessarily follow the housing market. Costs to rebuild are more likely to increase when the economy takes a turn. When insuring your home, you should have enough coverage to rebuild your home if needed. Using assessed or market value to decide on this amount could mean you are under- or overinsured.

weabenefits.com


Failing to have your insurance reviewed or adjusted Mark Dannehl

3. Some people buy their insurance

policy and never look at it again. While it’s recommended you review your insurance coverages at least every other year, it’s especially important when you make improvements. Even if the policy has a built-in inflation guard, chances are it hasn’t kept up with the real costs of rebuilding or any remodeling projects that have increased the value of the home. An insurance evaluation can uncover new risks and offer cost-effective ways get the protection you need. For example, during a recent evaluation with a member, I learned that he had finished his basement over the summer. It was a costly project and it definitely added value to their home, but their policy didn’t have coverage for sewer/drain backups. Backed up sewers can wreak havoc on a home, causing thousands of dollars in damage to floors, walls, furniture, and electrical systems. I explained that home insurance policies have very limited coverage for water damage. However, water damage due to drain and sewer back up or sump pump failure may be covered with the addition of an endorsement. The national average cost for a backup of sewer/drain claim is $9,000. For the additional $40–$50 per year, the member thought the coverage was a good value to protect their newly renovated basement. Periodic insurance reviews will help ensure your coverage is still appropriate, which can mean eliminating coverages you no longer need and adding new ones you do.

Not having enough liability coverage Marisa Braun

4. If someone slips and falls on your

property and you are found negligent, liability coverage—which is part of the typical home policy—pays the cost of the claim (up to the limits of your policy). Liability covers medical expenses, lost weabenefits.com

wages, pain and suffering, as well as legal defense costs should you be sued. Coverage limits start at $100,000, and while that might sound like a lot of coverage, it doesn’t go far when medical expenses are involved or you are being sued. Member Benefits doesn’t offer less than $500,000 of liability coverage for your home, condo, or renters policies because we think it leaves our members at risk. I’ve had a lot of conversations lately with people who carry the minimum liability coverage. In explaining the coverage, I find many people are not aware of the types of events covered by liability coverage. They’re also not aware that the coverage follows you wherever you go—not just at your residence. For example, if you hit someone with your cart at the grocery store causing them to fall and break a hip, you could be found liable for their medical expenses. Plus, the individual might lose wages because they miss work. Those costs can easily exceed $100,000. Or maybe you injure a friend with a ball in a casual game of softball or basketball. You could get sued for their medical costs. Friendships can quickly become strained when there are thousands of dollars at stake. Liability insurance is there to protect your assets like your home and future earnings, and quite possibly a friendship.

Not scheduling high-value items Stefanie Walsh

5.

Did you know standard home policies provide only limited protection for high-value items? Adding an endorsement (also called a rider or schedule) to your home policy for valuable possessions can provide

coverage for their full worth. During an insurance evaluation with a potential member, I asked if there were any valuable items to schedule like jewelry or artwork. The member didn’t currently have scheduled items and was under the impression everything, including her $5,000 wedding ring, would be covered under personal property coverage. I explained that even a covered loss like theft would be limited by the terms of the policy and subject to the deductible. Losses such as mysterious disappearance or a gemstone falling out would not be covered at all. By scheduling an item, the coverage limitation is removed, deductibles do not apply, and coverage is expanded to include perils such as mysterious disappearance. Here’s another example of how scheduling can be a good addition. Say your insured college student loses his or her laptop or it gets doused with a can of soda. You’ll be out of luck unless you scheduled the item with your insurance. While theft is a covered loss on your standard home policy, losing an item or accidental damage are not. And again, deductibles do not apply to scheduled items. Scheduling high-value items is often an overlooked coverage, but the low cost for the added protection is a good value. This article is for informational purposes only and is not intended to constitute legal, financial, or tax advice. Certain recommendations or guidelines may not be appropriate for everyone. Consult your personal advisor or attorney for advice specific to your unique circumstances before taking action. Property and casualty insurance programs are underwritten by WEA Property & Casualty Insurance Company. The terms and conditions of your coverage are exclusively controlled by your written policy. Please refer to your policy for details. Certain policy exclusions and limitations may apply.

Schedule a free personal insurance consultation weabenefits.com/consults Get an insurance quote weabenefits.com/quickquote Call us with your questions 1-800-279-4010

13


{ your kiosk

Use your IRA to help charity Did you know you can choose to give up to $100,000 to a qualified charity from your Individual Retirement Account (IRA) without counting it as taxable income when you are over 70 ½ years old? This type of gift is called a qualified charitable distribution (QCD). It’s not only a powerful incentive for charitable giving, it also has tax benefits. QCDs count as IRA distributions, so they can be used to satisfy all or some of your required minimum distribution (RMD) for the calendar year. Normally, taking money out of a Traditional IRA adds to your taxable income and inflates your adjusted gross income. But

Long-term care coverage gap Many people are surprised to learn that most health insurance policies, including Medicare and Medicare supplements, do not cover most long-term care (LTC) costs. Group medical plans and Medicare provide excellent acute care coverage but very limited coverage for skilled, home health, or custodial care. LTC insurance can help you: • Protect your assets. • Remain in your home and receive the quality care you need. • Avoid burdening your family with the responsibility of caring for you. To learn more about LTC insurance, call 1-888-247-5905 or visit weabenefits.com/ltc.

your QCD does not increase the adjusted gross income on your taxes because it isn’t taxable income in the first place. This is significant because having a higher taxable income can affect things such as your tax rate on Social Security benefits, Roth contribution eligibility, and Medicare premiums. The QCD provision only applies to your Traditional or Roth IRA. You do, however, have the option of rolling your pretax 403(b) money into a Traditional IRA to take advantage of the QCD—you just have to wait until after the calendar year in which you rolled the funds over to use it. Member Benefits requires you to complete a specific form if you wish to take advantage of this IRA option. First,

we need confirmation of the charity’s tax status. Then the distribution gets paid directly to the charity. (If you simply make a withdrawal from your IRA and pass it along to a charity, it is a taxable distribution, not a QCD.) As with most IRS provisions, we encourage you to work closely with your tax advisor to determine what would work best for your specific situation.

Skilled nursing facility Health insurance: Coverage usually limited to a maximum benefit of up to 90 days per calendar year, if you need skilled care on a daily basis.

Average annual cost $82,128 (semi-private room)

Medicare: Days 1–20: 100% coverage. Days 21–100: All but $164.50 (2017 amount) per day of each benefit period. Days 101 and beyond: NOTHING.

Home health care Health insurance: Coverage usually limited to a maximum benefit of 90 visits per calendar year, if you need skilled care.

Average annual cost $46.332 (home health aide)

Medicare: Coverage only for part-time or “intermittent” skilled nursing care and home health aide services.

Assisted living facility Health insurance: Usually not mentioned/not covered by health insurance plans. Medicare: Will never pay for care in a continuing care retirement community or in an assisted living facility.

Average annual cost $43,536

Custodial care (help with personal care) Health insurance: Plans do not usually cover custodial care, regardless of where care is received. You’ll find details in the exclusions and limitations section of the policy. Medicare: Does not cover custodial care when it’s the only kind of care you need.

14

Long-term care (LTC) insurance products are underwritten by multiple LTC insurers. Program administered by LTCi Marketing Administrators Inc. (LiMA). Source for average annual costs (national median), Genworth 2016 Cost of Care Survey. weabenefits.com


Don’t let home cooking get too hot to handle According to the National Fire Protection Association, the number of structure fires, which includes homes, has not declined in the last 15 years. And they’re still fatal: 78% of all fire deaths occur in home fires. The number one cause of home fires and injuries? Unattended cooking on ranges or cook tops, which caused an annual average of $1.1 billion in property damage between 2010–2014. Fortunately, there are some simple things you can do to avoid fire damage to your property. • Stay in the kitchen while you’re frying, grilling, boiling, or broiling food. • Check your food regularly. • Place anything that can catch fire away from your stove top. • Keep a lid nearby to smother small grease fires. • Never cook if you’re sleepy or have consumed alcohol—you need to stay alert.

NFPA reminds you Cooking is the

leading cause of home fires and home fire injuries.

Keep anything that can catch fire: oven mitts, wooden utensils, food packaging, towels or curtains, away from the stovetop.

eye n a p e e K what on fry! you Stay in the kitchen when frying, grilling, or broiling food. If you must leave, even for a second, turn the stove off.

The kitchen is the leading area of origin for home fires.

Unattended cooking is the leading cause of home cooking fires.

If you have a pan fire, slide a lid on the pan and turn off the burner.

The cooking range, or cooktop, is involved in the majority of cooking fire incidents, deaths and injuries.

Thanksgiving is the peak day Have a child-free zone of at least 3-feet around areas where hot food and drink is prepared or carried.

for home cooking fires, followed by Christmas Day, and Christmas Eve.

New video

Young educators get the message This uplifting video acknowledges the significant challenge new educators face when starting their careers. Not only are they focused on getting settled in their position, day-today lesson plans, and helping their students, they also have new financial responsibilities like student loans, rent, car payments, insurance, and yes, saving for their future. Managing it all can be daunting. Knowing that it is possible to do well financially while doing good in the classroom can be very reassuring. Having a trusted resource that can help them start their career on the right financial foot is priceless. This video uncovers one critical time-sensitive message that every young educator needs to know to reap the rewards of a long and rewarding career. Watch it, then share it.

weabenefits.com/ startsmallfinishbig

©2013 NATIONAL FIRE PROTECTION ASSOCIATON BATTERYMARCH PARK, QUINCY, MA 02169 NFPA.ORG/EDUCATION • SPARKY.ORG

Source: National Fire Protection Association. Visit nfpa.org/cooking for more information.

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15


PO Box 7893, Madison, WI 53707-7893

Does your current auto insurance policy offer these exceptional features?

WI EDUCATOR ON BOARD

Violation forgiveness.

We waive one minor moving violation per insured household.

No surcharge on comprehensive claims.

We do not surcharge for comprehensive claims like deer hits, hail damage, fire, theft, etc.

New car guarantee.

For a total loss of a new vehicle that is less than 180 days old, we pay the original purchase price of the vehicle.

Claim service guarantee.

If we don’t deliver fair, prompt, and accurate claim service, we’ll refund up to $250 of your deductible.

As a Wisconsin educator,

you qualify for a free personal insurance consultation with Member Benefits.

It’s easy. Give us a call or go online to schedule an appointment to talk with one of our insurance consultants. They can help you evaluate your current coverage and give you a comparison quote.

weabenefits.com/consults 1-800-279-4010 Get your quote online: weabenefits.com/quickquote

The only auto insurance created by Wisconsin educators for Wisconsin educators.

weabenefits.com Property and casualty insurance programs are underwritten by WEA Property & Casualty Insurance Company. The terms and conditions of your coverage are exclusively controlled by your written policy. Please refer to your policy for details. Certain policy exclusions and limitations may apply.

Your$ Magazine -- Winter 2017  

Chances of living 25 or 30 years after retirement are higher than you think…are you prepared for the long haul? PLUS! Special section: Inves...

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