Abc workshop ppt__1.5_hr__2014_v9
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  • Beginning Chapter 1.
  • Beginning Chapter 2.
  • Is the reward of long term investing (positive 1.19% - 6.95%) worth the risk (Negative 20%, 48%, 93%).
  • These are questions just to be asked and not answered.
  • These are questions just to be asked and not answered.
  • This four year graph shows a simple, base-model chassis of an index annuity. Let’s say that the market goes up 10% in the first year. The annuity company will cap your earnings in some manner, so let’s say the cap is 4%. Now, if the market went down the next year 40%, how much would you lose? Zero! So, would you be upset if the market went down 40% an you got zero? Of course not. Zero is your hero. In fact the 4% stays in the account unless you pull money out. In the third year, if the market went up 6% and the cap was still 4%, the company would give you 4% compounded on top of the first year’s earnings. In the fourth year, if the market went up a whopping 15%, and the cap was raised to 6%, you would throw in another 6%. Now you are up 14 plus percent because of compounding while the market isn’t even back to where it started in year one.Sounds too good to be true doesn’t it. So, let’s take a look at some negative aspects of the annuity. Once you deposit money in an annuity you will have limited liquidity, usually 10% a year of the account value, after the first year. The length of term can be anywhere from 3 to 16 years. You can choose a ladder of maturities that never go over 10 years or even less if you’d like. That’s why you develop liquidity in Columns A and C of the ABC Model. You need to find out about caps and other riders that can limit or enhance your earning power, which is something we discuss on an individual basis.

Abc workshop ppt__1.5_hr__2014_v9 Abc workshop ppt__1.5_hr__2014_v9 Presentation Transcript

  • ABC_WORKSHOP_PPT__1.5_Hr__2014_v9.pptx
  • DISCLAIMER The Course “Conservative Investing made 123 Easy” is an educational program, and is not intended to sell investment or insurance products, nor is it intended to provide tax or legal advice. Consult with your tax advisor and/or legal counsel for suitability for your specific situation. Hypothetical and/or actual historical returns contained in this presentation are for informational purposes only and are not intended to be an offer, solicitation, or recommendation. Rates of return are not guaranteed and are for illustrative purposes only. Projected rates do not reflect the actual or expected performance within any example or financial product. David S. Edge and David P. Schaeffer are Licensed Financial Professionals with American Retirement Advisors. e
  • s Things you should know!
  • s Things you should know! AmericanRetire.com/ Radio
  • Warren Buffets Rules for Investing 2. Always follow rule #1 s
  • What we will cover! • How to eliminate the “what if’s” and guesswork • The elements of a retirement income plan • How to feel good about your investing decisions • How to analyze mutual fund performance • How brokers are really paid. • How to identify outdated models • Identify opportunities for maximum returns e
  • Forbes Magazine “Todays retirees have no use for theories, guesswork or past performance. They need certainty and guarantees.” ~~David P. Schaeffer e
  • Our need to do a better job! • Life based on things we can count on creates peace of mind. • Understanding change is inevitable, your expenses are relatively constant. • • Wouldn’t predictable income be nice it were possible? s
  • Phases of your Investment Life • While working you are ACCUMULATING • As you approach and enter retirement you should be PRESERVING • After you fully transition to retirement is called DISTRIBUTION 9
  • Why Are We Here? • Do you know how all of your assets (stocks, bonds, mutual funds, annuities, REITS, Life Insurance, etc.) work together to achieve the amount of risk you want in your total portfolio? e s
  • Conservative Investing • It is not “FAD” investing • It is for the “Long Haul Investing” • It allows you to sleep at night e
  • RISK and what is it? • Market Risk • Business Risk • Inflation Risk • Sovereign Risk • Interest Rate Risk • Re-Investments Risk • Price Risk • Liquidity Risk • Systematic Risk • Un-Systematic Risk • Event Risk • Political Risk s e
  • RISK TOLERANCE SCALE + 8% + 15% + 26% + 34% + 100% - 8% - 9% - 17% - 23% - 100% s
  • S&P 500 Chart 1934 - 2014 s e
  • s 5.28% Compounded rate of Return without withdrawals
  • This Year s
  • • Cultural Shift • Investing vs. Gambling • Pensions & 401(K) Plans Times have changed e
  • Suggested Reading • 1988 – Only legal in 2 states. • 1994 – Operating in 23 states. • 2000 – Over 34 million people visited Vegas. • 2000 – Over 127M people visited casinos. • 2003 – Casinos were operating in 48 states s e
  • Where did my pension go? • 1978 – Section 401k was amended. • 1983 – 50% of large Companies switched to 401k • 1985 – About 8M & 100 billion invested in 401k’s • 2006 – 70M+ people and 3 Trillion Invested. s
  • • Wall Street is Disconnected • Information Overload • Long-Term Market Returns The Need For A New Model e s
  • Source: DOW & S&P500 returns from financial.google.com, as of 01/01/2014. DJI returns from Indices are unmanaged, do not incur fees or expenses. Source: 5 year CD rates from Federal Reserve Board.s
  • The Model • Where to allocate assets to avoid volatility. • Which assets to use and why. • “123 Easy” process to achieve your goals. e
  • The Model • Three Purposes of Money • Yellow is LIQUID and available on Demand • Green is PROTECTED and is Principal Insure • Red is to hedge against INFLATION s
  • The Model A Demand Accounts (Cash) Low Interest Taxable or Tax-Deferred Liquid s The Yellow Money Rules 1. Accessible with no penalties 2. Accessible with minimal penalty
  • B Principal Insured (Growth/Income) Moderate Interest Tax-Deferred Partial Liquidity The Model s The Green Money Rules 1. Your Principal is Fully Insured 2. All Interest Earned is Yours 3. Income is Guaranteed
  • C Risk (Growth/Income) Gains (Loss) Taxable or Tax-Deferred Partial or Liquid The Model s The Red Money Rules 1. Your Principal is at Risk 2. All Gains and Loss fluctuate 3. No Guarantees
  • A B C Demand Accounts (Cash) Principal Insured (Growth/Income) Risk (Growth/Income) Low Interest Taxable or Tax-Deferred Liquid Moderate Interest Tax-Deferred Partial Liquidity Gains (Loss) Taxable or Tax-Deferred Partial or Liquid The Model s
  • What is Your Goal? A B C Demand Accounts (Cash) Principal Insured (Growth/Income) Risk (Growth/Income) Low Interest Taxable or Tax-Deferred Liquid Moderate Interest Tax-Deferred Partial Liquidity Gains (Loss) Taxable or Tax-Deferred Partial or Liquid Access to Cash Protection Gains (Loss) Growth Liquidity Protection s
  • Aggressive (at Age 65) A B C Demand Accounts (Cash) Principal Insured (Growth/Income) Risk (Growth/Income) Low Interest Taxable or Tax-Deferred Liquid Moderate Interest Tax-Deferred Partial Liquidity Gains (Loss) Taxable or Tax-Deferred Partial or Liquid 10 % 0% 90% s
  • Conservative (at Age 65) A B C Demand Accounts (Cash) Principal Insured (Growth/Income) Risk (Growth/Income) Low Interest Taxable or Tax-Deferred Liquid Moderate Interest Tax-Deferred Partial Liquidity Gains (Loss) Taxable or Tax-Deferred Partial or Liquid 10 % 60% 30% s
  • “Hulbert’s data shows that more than 84% of mutual funds underperform the market over a 5-year period. Over ten years, that number rises to 90%.” Morningstar Publications e
  • Say Goodbye to the 4% rule “ If you retired in in January 1, 2000 and withdrew 4% each year from a portfolio of 55% stocks and 45% bonds you would have lost 33% of your principal savings. 71% of people using this traditional mutual fund strategy will outlive their money.” ~~Wall Street Journal and T. Rowe Price. e
  • • Measuring (The Unknown) – Systematic Risk – Volatility – Variance • Indicators – Alpha (Always looking to increase over 1.0) – Beta (Always looking to decrease below 1.0) – Standard Deviation (Always looking for Zero) – R-Squared (Always looking for 85 or more) Class Exercise - Red Money s e ho
  • • Every 3 years you have a bear market. • Every 8 years you have a significant bear market. • If you hold your money for 17 years you won’t have a problem. On Average e
  • The Last Bear Market 2000-2009 S&P 500 Returns 1 2 3 Total Gain / Loss $ Gain / Loss %3% 7% cap S&P 500 2000-2009 $50,000 $0 $450,000 $500,000 -10.14% $51,500 $0 $404,370 $455,870 -$44,130 -9% -13.04% $53,045 $0 $351,640 $404,685 -$51,185 -11% -23.37% $54,636 $0 $269,462 $324,098 -$80,587 -20% 26.38% $56,275 $0 $396,821 $72,723 23% 8.99% $0 $429,125 $32,303 8% 3.00% $59,703 $0 $382,296 $441,998 $12,874 4% 13.62% $61,494 $0 $434,464 $495,858 $53,860 12% 3.53% $63,339 $0 $449,698 $513,036 $17,178 3% -38.49% $65,239 $0 $276,609 $341,848 -$171,188 -34% 19.67% $67,196 $0 $331,018 $398,214 $56,366 16% After 10 Yrs $67,196 $0 $331,018 $398,214 $101,786 -20% Your Mix 10% 0% 90% -$101,786 Less in your accounts s
  • The “123 Model” in the Last Bear Market S&P 500 Returns 1 2 3 Total Gain / Loss $ Gain / Loss %3% 7% cap S&P 500 2000-2009 $50,000 $300,000 $150,000 $500,000 -10.14% $51,500 $300,000 $134,790 $486,290 -$13,710 -3% -13.04% $53,045 $300,000 $117,213 $470,258 -$16,032 -3% -23.37% $54,636 $300,000 $89,821 $444,457 -$25,801 -5% 26.38% $56,275 $321,000 $113,515 $490,791 $46,334 10% 8.99% $525,154 $34,363 7% 3.00% $59,703 $540,909 $15,755 3% 13.62% $61,494 $584,820 $43,911 8% 3.53% $63,339 $391,901 $149,899 $605,138 $20,318 3% -38.49% $65,239 $391,901 $110,339 549,342 -$55,796 -9% 19.67% $67,196 $419,334 $92,203 $596,969 $47,427 9% After 10 Yrs $67,196 $419,334 $110,339 $596,969 $96,869 19% Your Mix 10% 60% 30% $198,655 more in your accounts s
  • Year FourYear One Year Two Year Three 10% 4% cap -40% 0% 6% 4% Your up 8%+ 4% Your up 12%+ 15% FIA Simple Four Year Graph Still up 4% Your up 4% •Market •FIA s
  • Actual FIA Historical Performance* *DISCLOSURE: This is a Hypothetical Graph that reflects the actual interest crediting methods used by a specific insurance company from a time period beginning 09/30/1998 and ending on 09/30/2013. Individual results may vary and be dependent upon crediting methods, caps and participation rates. This is for illustration purposes only to show how a Fixed Index Annuity may have performed over a specific period of time. Annual Monthly Average S&P 500 2.75% Compounded Interest s
  • The Greatest Need… INCOME • So… when will you need income? • What is your plan to make your income last up to three decades? • What affect would market losses have on your retirement income? e s
  • Accumulation on $500,000 Inverse Returns Effect Year Annual Return End of Year Value Inverse Return End of Year Value 1 +28% $640,000 -38% $310,000 2 -10% $576,000 -12% $272,800 3 +15% $662,400 +2% $278,256 4 +17% $775,008 +15% $319,994 5 +1% $782,758 +26% $403,193 6 +26% $986,275 +1% $407,225 7 +15% $1,134,216 +17% $476,453 8 +2% $1,156,901 +15% $547,921 9 -12% $1,018,073 -10% $493,129 10 -38% $631,205 +28% $631,205 s
  • Income on $500,000 Inverse Returns Effect Year Annual Return Annual Withdraw End of Year Value Inverse Return End of Year Value 1 +28% $35,000 $605,000 -38% $275,000 2 -10% $36,225 $508,275 -12% $205,775 3 +15% $37,493 $547,023 +2% $172,398 4 +17% $38,805 $601,212 +15% $159,452 5 +1% $40,163 $567,061 +26% $160,746 6 +26% $41,569 $672,928 +1% $120,785 7 +15% $43,024 $730,843 +17% $98,294 8 +2% $44,530 $700,930 +15% $68,509 9 -12% $46,088 $579,730 -10% $15,570 10 -38% $47,701 $306,151 +28% (-$27,772) 5.8% Inflation Adjusted Annually s
  • Steps to a “123 Easy” Plan • Step One – –Gather Your Investable Assets –Discuss your Retirement Goals / Budget • Step Two –Determine Your Yellow, Green & Red Mix –Create Your Retirement Planning Time Line • Step Three –Review and Adjust (Rinse and Repeat) e
  • Income Planning “The 123 Easy Method” 43 s
  • Is Guaranteed Income Important to You in Retirement? Are you still paying management fees on your entire portfolio? Hmmm… e
  • The “123 Easy” Dating Process • Discovery • Recommendation • Clarify and Initiate • Review and Refine s
  • Register Today For Your Free: 1. Subscription to the “American RetirementAdvisor” 2. David Vick’s Book 3. Your Financial Snapshot & Planning Time Line s
  • AmericanRetire.com s