Retirement Income Planning

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2. Sources of Retirement Income

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Retirement Income Planning

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1. 1 Retirement Income Planning Presented by New York Life Annuities New York Life Annuities are issued by New York Life Insurance and Annuity Corporation (NYLIAC) (A Delaware Corporation), a wholly owned subsidiary of New York Life Insurance Company, 51 Madison Avenue, New York, NY 10010. All guarantees are based on the claims-paying ability of the issuer. Securities offered through Raymond James Financial Services Inc., Member FINRA/SIPC

2. 2 Sources of Retirement Income – Then vs. Now Then… Retirees relied on guaranteed income for life from pensions and Social Security benefits funded by corporations and government programs Income from personal savings was just a small piece of the pie Now… Social Security is providing a smaller percentage of the income needed in Retirement Many people do not have a pension Responsibility for accumulating retirement savings and generating retirement income is shifting from organizations to individuals Let’s take a look at traditional vs. today’s sources of retirement income Read Slide Let’s take a look at traditional vs. today’s sources of retirement income Read Slide

3. 3 Retirees are Facing Several Retirement Income Challenges Retirees will have to rely less on Social Security and pensions to provide retirement income and more on their own accumulated savings and investments Retirees are faced with new challenges and a bigger risk of outliving their assets Life Expectancy Market Uncertainty Withdrawal Rate Health Care Costs Inflation Retirees like you are facing several of retirement income challenges. Can you name any? Here are the answers: Life Expectancy Health Care Costs Market Uncertainty Withdrawal Rate Inflation Retirees like you are facing several of retirement income challenges. Can you name any? Here are the answers: Life Expectancy Health Care Costs Market Uncertainty Withdrawal Rate Inflation

4. 4 Life Expectancy This chart shows the probability of a healthy 65-year old living to various ages. As you’ll see, most 65-year-olds can expect to live to at least age 75, a majority of them will live until at least age 85, and a significant portion will make it to at least 95. It’s important to understand how to interpret this information. Just because a certain percentage of 65-year-olds will reach 75, 85 or 95 doesn’t mean that people should try to make sure money lasts for a specific number of years. In fact, if a 65-year-old has a 50% chance of living to a certain age, it means that half of all 65-year-olds have lived beyond that age.This chart shows the probability of a healthy 65-year old living to various ages. As you’ll see, most 65-year-olds can expect to live to at least age 75, a majority of them will live until at least age 85, and a significant portion will make it to at least 95. It’s important to understand how to interpret this information. Just because a certain percentage of 65-year-olds will reach 75, 85 or 95 doesn’t mean that people should try to make sure money lasts for a specific number of years. In fact, if a 65-year-old has a 50% chance of living to a certain age, it means that half of all 65-year-olds have lived beyond that age.

5. 5 Market Uncertainty Let’s take a look at portfolios for someone who is adding money to the portfolio. Here are two hypothetical portfolios, both earning an annual return of 10% per year in 9 of the 10 years, and both having a 20% loss in 1 of the 10 years. The only difference is that Portfolio 1 (dark blue) experiences its loss in year 9 and Portfolio 2 (light blue) experiences its loss in year 2. As you can see, the results at year 10 show that Portfolio 1 is valued at $161,807, whereas Portfolio 2 is only valued at $130,499 Let’s take a look at portfolios for someone who is adding money to the portfolio. Here are two hypothetical portfolios, both earning an annual return of 10% per year in 9 of the 10 years, and both having a 20% loss in 1 of the 10 years. The only difference is that Portfolio 1 (dark blue) experiences its loss in year 9 and Portfolio 2 (light blue) experiences its loss in year 2. As you can see, the results at year 10 show that Portfolio 1 is valued at $161,807, whereas Portfolio 2 is only valued at $130,499

6. 6 Market Uncertainty Let’s take a look at portfolios for someone who is withdrawing from the portfolio. Here are two hypothetical $100,000 portfolios, both earning an annual return of 10% per year in 9 of the 10 years, and both having a 20% loss in 1 of the 10 years. The only difference is that Portfolio 1 (turquoise line) experiences its loss in year 9 and Portfolio 2 (blue line) experiences its loss in year 2. In addition, we are going to take a $10,000 annual withdrawal from both portfolios. As you can see, the results at year 10 show that Portfolio 1 is valued at $58,136, whereas Portfolio 2 is only valued at $26,829. When retirees begin withdrawing money for income from their investments, they may not be able to stop taking withdrawals during down years – certainly their expenses won’t stop just because their investments drop. If those down years happen early in a retiree’s withdrawal plan, they may run out of money sooner than expected.Let’s take a look at portfolios for someone who is withdrawing from the portfolio. Here are two hypothetical $100,000 portfolios, both earning an annual return of 10% per year in 9 of the 10 years, and both having a 20% loss in 1 of the 10 years. The only difference is that Portfolio 1 (turquoise line) experiences its loss in year 9 and Portfolio 2 (blue line) experiences its loss in year 2. In addition, we are going to take a $10,000 annual withdrawal from both portfolios. As you can see, the results at year 10 show that Portfolio 1 is valued at $58,136, whereas Portfolio 2 is only valued at $26,829. When retirees begin withdrawing money for income from their investments, they may not be able to stop taking withdrawals during down years – certainly their expenses won’t stop just because their investments drop. If those down years happen early in a retiree’s withdrawal plan, they may run out of money sooner than expected.

7. 7 Withdrawal Rates When selecting a withdrawal rate for income, the amount withdrawn is only half of the equation. You also need to know how much the money is earning. If withdrawals exceed the interest earned, a retiree will use principal to cover expenses. Over time, this will deplete savings, and your client will eventually run out of money. This chart shows how long savings will last based on the annual interest earned and the amount withdrawn each year for income.When selecting a withdrawal rate for income, the amount withdrawn is only half of the equation. You also need to know how much the money is earning. If withdrawals exceed the interest earned, a retiree will use principal to cover expenses. Over time, this will deplete savings, and your client will eventually run out of money. This chart shows how long savings will last based on the annual interest earned and the amount withdrawn each year for income.

8. 8 Health Care Costs Combined with inflation, rising health care costs can put a significant strain on retirement income. Of course, we’re all already feeling the strain of rising health care costs: prescription fees are rising, medical co-pays are increasing, and our insurance plans are covering fewer expenses. In addition, what really concerns retirees is that health care costs increase with age. So, it’s important to set aside larger portions for medical expenses, or even purchase a second insurance package, to guard against catastrophic medical bills if health declines with age. This chart illustrates how crucial it is to plan for the effects of health care costs and inflation. The blue line represents the rate of inflation between 2000 and 2007; the turquoise line represents the growth in health care costs during the same time. As you can see, health care costs are outpacing inflation. Your clients need to prepare to make up for those increases if they want to maintain a lifestyle in retirement that’s close to the one they’re enjoying now.Combined with inflation, rising health care costs can put a significant strain on retirement income. Of course, we’re all already feeling the strain of rising health care costs: prescription fees are rising, medical co-pays are increasing, and our insurance plans are covering fewer expenses. In addition, what really concerns retirees is that health care costs increase with age. So, it’s important to set aside larger portions for medical expenses, or even purchase a second insurance package, to guard against catastrophic medical bills if health declines with age. This chart illustrates how crucial it is to plan for the effects of health care costs and inflation. The blue line represents the rate of inflation between 2000 and 2007; the turquoise line represents the growth in health care costs during the same time. As you can see, health care costs are outpacing inflation. Your clients need to prepare to make up for those increases if they want to maintain a lifestyle in retirement that’s close to the one they’re enjoying now.

9. 9 Inflation: How it Impacts Purchasing Power Whether your clients live 4 or 40 years in retirement, inflation is inevitable. People in the job force usually keep up with inflation through pay increases. But after retirement, few people can increase their income enough to keep pace with the cost of living. This country’s average annual inflation rate between 1913 and 2006 was 3.4%. (Source: History of Consumer Price Index 1913-2006, U.S. Department of Labor Bureau of Labor Statistics, published 2/21/07) This hypothetical chart illustrates the impact of inflation on retirement income needs assuming inflation rates of 3% and 4%. If retirement expenses are $50,000 a year today, look what your clients will need to have in 10, 20 or 30 years just to afford what they could buy today.Whether your clients live 4 or 40 years in retirement, inflation is inevitable. People in the job force usually keep up with inflation through pay increases. But after retirement, few people can increase their income enough to keep pace with the cost of living. This country’s average annual inflation rate between 1913 and 2006 was 3.4%. (Source: History of Consumer Price Index 1913-2006, U.S. Department of Labor Bureau of Labor Statistics, published 2/21/07) This hypothetical chart illustrates the impact of inflation on retirement income needs assuming inflation rates of 3% and 4%. If retirement expenses are $50,000 a year today, look what your clients will need to have in 10, 20 or 30 years just to afford what they could buy today.

10. 10 The 4-Box Strategy for Retirement Income

11. 11 We Believe… We believe there is a simple formula for a successful retirement. We call this formula: We believe there is a simple approach to retirement. First, cover basic expenses with a guaranteed source of income. Then, optimize your portfolio for your discretionary expenses, growth needs and legacy wishes. This approach will help ensure that you maximize your income and spend your time enjoying retirement.We believe there is a simple approach to retirement. First, cover basic expenses with a guaranteed source of income. Then, optimize your portfolio for your discretionary expenses, growth needs and legacy wishes. This approach will help ensure that you maximize your income and spend your time enjoying retirement.

12. 12 The 4-Box Strategy for Retirement Income Step 1 Pay for basic expenses such as food, housing, health care and lifestyle needs with guaranteed sources of income you cannot outlive Step 2 Pay for discretionary expenses with income from assets Let’s take a look at the 4 box strategy. Step 1 Cover basic expenses such as food, housing, health care and lifestyle needs with guaranteed sources of income you cannot outlive Step 2 Cover discretionary expenses with income from assets, including additional guaranteed sources of lifetime income Let’s take a look at the 4 box strategy. Step 1 Cover basic expenses such as food, housing, health care and lifestyle needs with guaranteed sources of income you cannot outlive Step 2 Cover discretionary expenses with income from assets, including additional guaranteed sources of lifetime income

13. 13 Step 1 – Pay for Basic Expenses with Guaranteed Lifetime Income The New York Life Lifetime Income Annuity can fill the income gap using the least amount of assets Read slideRead slide

14. 14 Step 2 – Pay for Discretionary Expenses with Remainder of Portfolio Retirement Income Asset Allocation for remaining assets includes Guaranteed Lifetime Income as a unique asset class Read slideRead slide

15. 15 Step 2 – Pay for Discretionary Expenses with Remainder of Portfolio Use a combination of Guaranteed Lifetime Income and withdrawals from remaining assets to pay for discretionary expenses Read slideRead slide

16. 16 A Potential Solution for Guaranteed Lifetime Income – The New York Life Lifetime Income Annuity

17. 17 Provides guaranteed lifetime income for one or two people from a single premium payment Offers several payout options to maximize current income or provide a legacy to loved ones Optional inflation protection, flexibility and liquidity** features available* Issued by New York Life Insurance and Annuity Corporation (A Delaware Corporation), a wholly owned subsidiary of New York Life Insurance Company All guarantees are based on the claims-paying ability of the issuer. *Optional features available in jurisdictions where approved. Some optional features may increase initial premium or decrease income payments. **Any withdrawals may be subject to income tax and, prior to age 59½, a 10% federal tax penalty may apply. Withdrawals from annuities affect both the account value and death benefit. New York Life Lifetime Income Annuity By now, you’ve learned that your retirement income needs may not meet their expenses, and that your retirement assets may not generate enough income to close that gap. So what other options do you have? One potential solution is an immediate lifetime annuity. Simply put, you use a portion of your retirement assets to purchase a stream of retirement income for your entire life – no matter how long you live.By now, you’ve learned that your retirement income needs may not meet their expenses, and that your retirement assets may not generate enough income to close that gap. So what other options do you have? One potential solution is an immediate lifetime annuity. Simply put, you use a portion of your retirement assets to purchase a stream of retirement income for your entire life – no matter how long you live.

18. 18 The 4-Box Strategy for Retirement Income is Easy The 4-Box Strategy uses simplified tools such as easy-to-understand worksheets, questionnaires and income illustrations We take the burden out of managing your retirement income The New York Life Lifetime Income Annuity has many options and features available to customize your retirement income to your needs Read SlideRead Slide

19. 19 The 4-Box Strategy It can help you guarantee the most important things in your life-for the rest of your life. If this is of interest to you - let us know-because you have some homework to do! Read slideRead slide

20. 20 Get Started and Learn More Today! Schedule an appointment today to learn more about The 4-Box Strategy for Retirement Income Thank you! Schedule an appointment today to see how you can get Guaranteed Lifetime Income. Thank you. All guarantees are based on the claims paying ability of the insurer. For contracts purchased under IRA annuities special time limitations may apply to income start date.Schedule an appointment today to see how you can get Guaranteed Lifetime Income. Thank you. All guarantees are based on the claims paying ability of the insurer. For contracts purchased under IRA annuities special time limitations may apply to income start date.

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