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  • 1. The U.S. Retirement Market Gregory B. Salsbury, Ph.D. Executive Vice President Jackson National Life Distributors, Inc.
  • 2. The U.S. Retirement Market
    • The scope of the U.S. retirement savings market
    • The evolution of retirement
    • The need for financial planning and advice
  • 3. Retirement Assets by Country Source: JNL Market Research USA 71% UK 10% Japan 9% W. Europe 7% Rest of Asia 3%
  • 4. Top 10 Global Life Insurers (By Gross Written Premium) Source: AM Best, UBS Warburg Research, Company Accounts. Worldwide Life 2001 GWP. American Family Life Assurance Company of Columbus (AFLAC) Japan The Dai-ichi Mutual Life Insurance Company CGU Life Insurance Company of America, CGU Corporation, Commercial Union Life Insurance Company of America United Kingdom Aviva plc Allianz Insurance Company, Allianz Life Insurance Company of North America, Fireman’s Fund Insurance Company, Jefferson Insurance Company, NFJ Investment Group, Nicholas-Applegate Capital Management, Pacific Investment Management Company LLC Germany Allianz AG Hartford Life, Inc., Hartford Investment Management Company, HartRe, Fortis Financial United States The Hartford Financial Services Group, Inc. Domestic (US) Affiliates Country of Incorporation Company Name SunAmerica Inc., American General Corporation, 21st Century Insurance Group, AIG Global Investment Group, American Life Insurance Company, HSB Group, Inc., John McStay Investment Counsel, L.P. United States American International Group, Inc. MetLife Securities, Inc., State Street Research & Management Company, GenAmerica Corp., General American Life Insurance Company, Metropolitan Tower Life Insurance Co., New England Life Insurance Co., Security First Life Insurance Co., Nathan & Lewis Securities, Walnut Street Securities United States Metropolitan Life Jackson National Life Insurance Company, Jackson National Life of New York, Jackson Federal Bank, National Planning Holdings, Inc., PPM America, Inc. United Kingdom Prudential plc ING Aetna Financial Services, ING Aetna International, ING North America Insurance Corporation, ING ReliaStar Financial Corp., ING Baring (US) Financial Holdings Corporation, CLARION CRA Securities, ING Furman Selz Asset Management The Netherlands ING Groep N.V. AXA Rosenberg, AXA Financial, Inc., AXA Advisors, AXA Distributors, LLC, The Equitable Life Assurance Society of the United States, Alliance Capital Management L.P. (53%-owned), AXA Group, Sanford C. Bernstein & Co. France AXA Nippon Life Insurance of America Japan Nippon Life Insurance Company
  • 5. Investable Retirement Assets in the U.S. $4.0 $5.3 $7.3 $7.8 $9.2 $10.7 $12.5 $14.5 $6.6 $0 $5 $10 $15 1995 1997 1999 2001 2003 2005 2007 2009 2011 Retirement Market Assets ($Trillions) Total Private Retirement Market Assets (In $Trillions) Source: Cerulli Report, Retirement Industry Update: Trends in 401(k) and IRA Markets 2002 $7 trillion and growing
  • 6. Jackson National Life Assets $29,148 $33,096 $36,214 $43,953 $47,242 $49,919 $40,521 $20,000 $30,000 $40,000 $50,000 1996 1997 1998 1999 2000 2001 2002 (Q2) JNL Assets ($Millions) Total JNL Assets (In $Millions) GAAP assets. Excludes FAS-115, FAS-133, reverse repurchase obligations, and securities lending deposits. Nearly $50 billion and growing
  • 7. U.S. Investor Holdings 19% 49% 15% 19% 17% 30% 93% 3% 0% 20% 40% 60% 80% 100% Retirement Acounts Certificates of Deposit Savings Bonds Mutual Funds Stocks Bonds Life Insurance Any Financial Investment Source: Board of Governors of the Federal Reserve, Survey of Consumer Finances, 1998; The American Marketplace New Strategist Publications, 2001 Percentage of families holding investment assets
  • 8. Demographics: Net Worth by Age
    • Seniors hold the wealth
    • The myth of the young millionaire
    $146,500 $9,000 $63,000 $105,500 $127,500 $125,600 $0 $50,000 $100,000 $150,000 Less than 35 35-44 45-54 55-64 65-74 75 or more Source: Board of Governors of the Federal Reserve, Survey of Consumer Finances, 1998.
  • 9. The U.S. Retirement Market
    • The scope of the U.S. retirement savings market
    • The evolution of retirement
    • The need for financial planning and advice
  • 10. Pension and Retirement Changes 1935 1974 1978 1997 2001 2002 Social Security Act Employment Retirement Income Security Act Revenue Act Taxpayer Relief Act Economic Growth and Tax Relief Reconciliation Act Job Creation and Worker Assistance Act
  • 11. Social Security Overburdened
    • Social Security doesn’t pay very much
    • Most Americans depend on it
    • The ratio of payees to beneficiaries is shrinking
    • Future retirees will not likely receive Social Security
    Source: General Accounting Office; Cerulli Associates.
  • 12. In 15 years or less, Social Security will start paying out more than it takes in. By 2075, it will be $22.2 trillion in the hole. Source: Barron’s , “Pension Poverty,” January 28, 2002 Benefits warning!
  • 13. Death of the Company Pension
    • Companies unable to meet pension responsibilities
    • Defined Benefit yields to Defined Contribution
    • The boom in additional retirement plans
    Source: General Accounting Office; Cerulli Associates.
  • 14. Today’s Retirement Plans Defined Contribution Plans All Company 403(b) Individual Employer/Group Qualified Public 457 Traditional 401(k) Money Purchase Profit Sharing Small Company Individual 401(k) SIMPLE 401(k) SIMPLE IRA SEP IRA Safe Harbor 401(k) Traditional 401(k) Traditional IRA Roth IRA Alternative Savings Vehicles Non-qualified Annuities Life Insurance
  • 15. Defined Contribution Assets Grow $1.3 $1.8 $1.6 $2.0 $2.5 $3.0 $3.6 $4.4 $0.5 $0.6 $0.7 $0.6 $0.7 $0.8 $0.9 $1.1 $1.3 $0.9 $0.0 $2.5 $5.0 1995 1997 1999 2001 2003 2005 2007 2009 2011 Retirement Assets ($Trillions) Other DC Assets 401(k) Assets Source: Cerulli Report, Retirement Industry Update: Trends in 401(k) and IRA Markets 2002 $1.4 $1.9 $2.5 $2.2 $2.7 $3.3 $3.9 $4.7 $5.7
  • 16. IRA Assets $1.1 $1.5 $2.2 $2.6 $2.9 $3.5 $4.2 $5.1 $0 $2 $4 $6 1994 1996 1998 2000 2002 2004 2006 2008 IRA Assets ($Trillions) Source: Cerulli Report, Retirement Industry Update: Trends in 401(k) and IRA Markets 2002 Americans are managing nearly $3 trillion in IRA assets
  • 17. Variable Annuity Sales Growth $4.5 $112.8 $0 $20 $40 $60 $80 $100 $120 1985 2001 Source: J.P. Morgan and VARDS ($ in billions)
  • 18. Variable Annuity Asset Growth $176.0 $882.9 $0 $200 $400 $600 $800 $1,000 1991 2001 Source: J.P. Morgan and VARDS ($ in billions)
  • 19. Fixed Annuity Sales Growth $23.6 $74.3 $0 $20 $40 $60 $80 1985 2001 Source: LIMRA ($ in billions)
  • 20. After Years of Variable Annuity Growth, Fixed Sales are Back Source: J.P. Morgan, VARDS, and LIMRA $0 $50 $100 $150 $200 1997 1998 1999 2000 2001 Industry Annuity Sales ($Billions) Fixed VA EIA Industry Annuity Sales $131 $134 $196 $171 $192
  • 21. JNL Retirement Funding Vehicles
    • Fixed annuities
    • Variable annuities
    • Equity-indexed annuities
    • Life insurance
  • 22. Today’s Retirement Plans Defined Contribution Plans All Company 403(b) Individual Employer/Group Qualified Public 457 Traditional 401(k) Money Purchase Profit Sharing Small Company Individual 401(k) SIMPLE 401(k) SIMPLE IRA SEP IRA Safe Harbor 401(k) Traditional 401(k) Traditional IRA Roth IRA Alternative Savings Vehicles Non-qualified Annuities Life Insurance
  • 23. Today’s Retirement Plans Defined Contribution All Company 403(b) Individual Employer/Group Qualified Public 457 Traditional 401(k) Money Purchase Profit Sharing Small Company Individual 401(k) Simple 401(k) Simple IRA SEP IRA Safe Harbor 401(k) Traditional 401(k) Traditional IRA Roth IRA Alternative Savings Vehicles Non-qualified Annuities Life Insurance Under Review Directly Through TPA
  • 24. Driven by a Dying Pension System Aging baby boomers + Pension Self directed = Enormous personal wealth
  • 25. The Aging of the Aged
    • 80+ U.S. population growing 5 times faster than overall population
    • By the year 2030 in the U.S., the demographics of 32 states will resemble those of Florida today
    • By the year 2005, eldercare will replace childcare as the number one dependent care in the U.S.
    Source: Peterson, Peter G. Gray Dawn , OECD (1996); Department of Labor, www.lifeinsuranceselling.com , “The LTC Solution,” December 2001.
    • By the year 2030, one in four people in the developed world will be aged 65 or older
  • 26. Average Life Expectancy 46 80 86 48 84 92 0 20 40 60 80 100 1900 2000 2050 Men Women Source: National Vital Statistics Report, Vol. 48, No. 18, Feb. 7, 2001; U.S. Census Bureau projections, 1996; National Center for Health Statistics
  • 27. Retiring Younger Source: Burtless, Gary and J.F. Quinn. (2000) “Retirement Trends and Policies to Encourage Work Among Older Americans” and AARP (2000), “Beyond 50: A Report to the Nation on Economic Security.” 70 65 65 64 63 62 56 60 64 68 72 1950 1960 1970 1980 1990 2000
  • 28. The Increasing Tax Bite Source: Combined federal, state, and local taxes per capita as a percentage of income, 2001. Special Report, No. 104, April 2001, Tax Foundation The Tax Foundation has shown that the typical two-earner family now spends more on federal, state, and local taxes than on shelter, food, clothing and transportation combined. Source: “Tax Freedom Day Arrives,” www.house.gov/dunn/oped/txfree2.htm
  • 29. Who Pays America’s Taxes? 1 Top Taxpayer 49 Middle Taxpayers 36% 60% 4% 50 Bottom Taxpayers Source: Tax Foundation, February 2002 100 Taxpayers – February 2002
  • 30. JNL Provides Answers
    • Retirement funding vehicles
      • Taxed deferred savings
      • Accumulation and distribution
      • Options for every risk profile
  • 31. JNL Growing Client Base 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 Total Number of Policyholders 1995 to 2001 Prior to 1995
      • Source: JNL Market Research
      • Investment Clients are policyholders who purchased investment products such as Annuities, Stocks, Bonds and Mutual Funds. It does not include Life Insurance.
    800,000 600,000 1,400,000 JNL investment clients 1 increased 75%
  • 32. JNL Investor Profile 30% 9% 66% 44% 60% 0% 25% 50% 75% 100% Total Life Fixed VA EIA % of Policyholders Who are Retired Source: JNL Market Research Two-thirds of JNL Fixed Annuity owners are retired
  • 33. JNL Investor Profile 44% 54% 32% 34% 22% 23% 30% 20% 10% 6% 0% 25% 50% 75% 100% Total Life Fixed EIA VA % of Policyholders Income $60K-$90K Income $90K 67% 28% 52% 84% 44% Source: JNL Market Research; 1998 Survey of Consumer Finances. National Average = $33,000 Two-thirds of JNL investors have incomes in excess of $60K
  • 34. JNL Investor Profile $74,000 $123,000 $121,000 $124,500 $133,500 $184,500 $0 $100,000 $200,000 US Average JNL Total Life Insurance Fixed Perspective Persp. Advisor Average Household Investable Assets JNL Product Line Source: JNL Market Research; Board of Governors of Federal Reserve, Survey of Consumer Finances, 1998. On average, JNL policyholders have 66% higher wealth
  • 35. The U.S. Retirement Market
    • The scope of the U.S. retirement savings market
    • The evolution of retirement
    • The need for financial planning and advice
  • 36. The Impact of the Bull and the Bear on Investors
  • 37. Average Annual Returns Certificates of Deposit 3 6.48% S&P 500 1 16.29% Average Investor 2 5.32% Sources: 1 Ibbotson Associates 2002 Yearbook 2 Dalbar, Inc., “Quantitative Analysis of Investor Behavior,” June 21, 2001 3 www.federalreserve.gov, 1-month CDs January 1, 1984 - December 31, 2000
  • 38. The Equity Ride
    • 1982 to 1999 - large cap stocks averaged 18.5%
    • Five consecutive years of 20+% growth
    • U.S. household equity ownership doubled
    • Number of millionaires doubled between 1994 and 2000 (7.2 million)
    • 85% of all equity mutual fund accounts were added in the 1990s (48% after 1995)
    • What investors were taught …
    Sources: Gallup, Paine Webber, ICI, Strategic Insight, SIA, Federal Reserve Board, Nasdaq, Sept. 21, 2001; Yahoo Finance
  • 39.  
  • 40. The Equity Ride
    • Investors ended the decade expecting annual portfolio returns of 19-22%
    • Holding periods plummeted
    • At the end of the decade, there were 8,000+ retail mutual funds. The 10 best-selling equity funds accounted for 44% of net inflows
    Sources: Gallup, Paine Webber, ICI, Strategic Insight, SIA, Federal Reserve Board, Nasdaq, Sept. 21, 2001, Yahoo Finance
    • Mutual funds = 33 months
      • Stocks = 10 months
      • NASDAQ = 5 months
  • 41. The Equity Ride
    • As of 3/00, an unprecedented percentage of household assets in categories subject to principal loss
    • “ Buy” recommendations outnumbered “sells” 72 to 1
    Sources: Gallup, Paine Webber, ICI, Strategic Insight, SIA, Federal Reserve Board, Nasdaq, Sept. 21, 2001, Yahoo Finance
  • 42. And Then, The Ride Was Over …
    • 2000 worst year for S&P 500 since 1974, and then it got worse
    • By March of 2001 we hit official “Bear” territory for every major index
    • Then it got worse again …
    Sources: Gallup, Paine Webber, ICI, Strategic Insight, SIA, Federal Reserve Board, Nasdaq, Sept. 21, 2001, Yahoo Finance
  • 43. From Their Peaks …
    • DJIA - 35.24%
    • S&P 500 - 46.62%
    • MSCI EAFE - 49.43%
    • NASDAQ - 76.78%
    Source: As of 9/30/02, www.mscidata.com, http://finance.yahoo.com
  • 44. The Five Stages of Loss
    • Shock
    • Denial
    • Hurt
    • Anger
    • Acceptance
  • 45. Advisor Issues
    • Frightened investors
    • Fee-based pricing
    • Pursuit of the affluent
  • 46. JNL is Well-Positioned
    • Capitalizing on the retirement market
    • Focusing on advisors
    • Understanding investors
  • 47.  

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