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Retirement panel Retirement panel Presentation Transcript

  • Current State of the Retirement Income Industry Panelists: Rebekah Barsch, Northwestern Mutual Tom Hegna, TomHegna.com Curtis Cloke, Thrive Income Distribution System Moderator: Chris Raham, Ernst & Young LLP Presenting Sponsor: Produced By: Presenting Sponsor: Produced By:
  • Retirement Income A key Retirement Money-in-Motion™ milestone Retail banking Retention leaders enjoy 10% Meeting the basic banking needs of the consumer is the first step in gathering and retaining assets of and establishing a higher growth and 80 bps lower positive relationship with the Generation Y and Z consumer Retirement cost of funds Rollover The movement of investable assets from defined Money in Motion: Growing from US$323B in 2010 to contribution and defined benefit plans into retail/individual The flow of retirement US$490B in 2015 (annual DC / retirement and investment accounts (e.g., IRAs, managed money between accounts DB) accounts) and financial institutions, Asset consolidation Clients nearing retirement tend to consolidate their initiated as a result of a Avg. institutions per households accounts to a primary institution for ease of managing and life-changing event. spending down accumulated wealth declining since 2000 (7 accounts) Retirement income The shift in investment assets from accumulation strategies 18 Million retired households in to de-accumulation strategies, which requires the use of the US control US$2.5T income producing products and spend-down analysis Asset Rollover Retirement consolidation institutional Money in Motion income planning assets to milestone individual accounts Rollover due to RetirementClient job change income spendassets Basic planning, The fastest growing age Beneficiary/ trustee investing and group in the US is the “65 or banking needs older”; 80 million individuals will turn 65 in the next decade Client age Accumulation phase Transition Retirement Income Presenting Sponsor: Produced By:
  • State of mind or state of emergencyClient actions and questions to advisors are consistent…Source: Spectrem, Presenting Sponsor: Produced By:
  • State of mind or state of emergencyClient actions and questions to advisors are consistent… •Retirement planning actions comes too late driven by: -Life events—job loss, health issues -Imminent retirement (< 24 months) •Ask fewer questions on finances, but have basics issues that need to be addressed •Are focused more on government program impacts rather than what they can doSource: Client FA Survey Presenting Sponsor: Produced By:
  • State of mind or state of emergencyAnd result in a pending state of emergency…40% of newly retiredcouples will outlive theirassets70% of middle markethouseholds approaching 47% of early boomers willretirement (<10 years) will outlive their assetsoutlive their assetsSource: Americans for Secure Retirement 44% of Gen-X will outliveand Ernst & Young as of February 2009 41% of early boomers will their assets outlive their assets Source: EBRI 2010 Retirement Readiness Ratings update, July 2010 56% of Gen-X will outlive their assets 53% of households remain at risk Source: The National Retirement Risk Index: After the Crash, October 2009, Oct 2012 Presenting Sponsor: Produced By:
  • Northwestern Mutual’s Perspective Rebekah Barsch VP – Market Strategy and Training Northwestern Mutual Presenting Sponsor: Produced By: Presenting Sponsor: Produced By:
  • Comprehensive PlanningNorthwestern Mutual Retirement Strategy TM Presenting Sponsor: Produced By:
  • Long Term Care Insurance InvestmentsPermanent Life Insurance Annuities © 2012 The Northwestern Mutual Life Insurance Company Presenting Sponsor: Produced By:
  • © 2012 The Northwestern Mutual Life Insurance CompanyPresenting Sponsor: Produced By:
  • The Northwestern Mutual Perspective on Financial Security in Retirement Clients deserve a high • Use of stochastic modeling to produce 90% probability of success vs.probability of success from their 50% from deterministic modeling. retirement income plans.Even the smartest clients do not • Removal of individual life expectancy as a planning input; longevity know when they are going to monte carlo’d. die.Leaving a legacy is a function of • Combination of residual assets and permanent life insurance used to planning, not chance. fund legacy goals efficiently with high probability of success.Financial security in retirement • Use of long term care insurance by clients with less than $6 million inrequires addressing long term liquid assets enables higher retirement income. care risk. Essential expenses should be • Inclusion of annuities not only secures essential needs but alsocovered by guaranteed lifetime enables higher retirement income. income. © 2012 The Northwestern Mutual Life Insurance Company Presenting Sponsor: Produced By:
  • It’s all about AlphaRETIREMENT ALPHA that is… Tom Hegna CLU, ChFC, CASL President, TomHegna.com Presenting Sponsor: Produced By: Presenting Sponsor: Produced By:
  • Presenting Sponsor: Produced By:
  • Source: New York Life Insurance Company and Financial Research Corporation 2011 Presenting Sponsor: Produced By:
  • Whitepaper from FRC “Income Annuities offer features others can’t – High cash flow, uncorrelated to Retirement Alpha market returns; retirement alpha in the form of mortality credits, which only life insurance companies can manufacture; longevity hedging and liquidity features…“Our analysis shows that no other investment vehicle can rival the “There is no other vehicle in the income annuity for retirement marketplace that can convert assets security.” into income as efficiently as the income annuity.” Presenting Sponsor: Produced By: Source: FRC White Paper, “Income Annuities Improve Portfolio Outcomes in Retirement”
  • LIA Provides Clients with Higher Payouts Lifetime income annuities deliver higher payouts because, in addition to distributing gains and principal, they subsidize those who die late with the capital of those who die early. Components of Lifetime Income Payout Male age 65, $100,000 investment $7,000 $6,000 …but …but a life an insurance company can only only insurance company can $5,000 manufacture mortality credits manufacture a mortality pool.Payout $4,000 $3,000 Investment Advisors Can $2,000 Manufacture This Payout… $1,000 $0 Age Investment Growth Return of Principal Mortality Credits Source: New York Life Insurance Company 2010 Presenting Sponsor: Produced By: Source: New York Life, 2009
  • Presenting Sponsor: Produced By:
  • Whitepaper from FRC “Income Annuities generate more income per dollar of capital invested than any other income-generating asset class, are non-correlated with equity and bond markets, and perfectly hedge longevity risk.” “The income annuity offersunique properties that cannot bereplicated using other insurance “While a Variable Annuity (VA) with products such as VA’s with a GMWB rider might seem like an GMWB’s.” alternative to an income annuity, it is not” Presenting Sponsor: Produced By: Source: FRC White Paper, “Income Annuities Improve Portfolio Outcomes in Retirement”
  • What is a Deferred Income Annuity (DIA)?A guaranteed stream of income for life Provides “pension-like” stream of income for lifeIncome starts when you retire Typically 13 months – 50 years in the future Client selects income-start dateBuilt on the client’s terms Lump sum or multiple premiums Each premium payment guarantees future income at retirement date The more the client adds, the more income they get Presenting Sponsor: Produced By:
  • Safe, Secure, Reliable and Guaranteed A DIA— unlike many other traditional fixed income investments: Has no duration limit — the guaranteed payments continue for a lifetime, no matter what. Is not callable — provides a steady stream of income payments for life. Is not impacted by the sequence of returns — regardless of when an investor retires, the payments remain consistent and level. Has no interest rate risk — since payments are fixed, even if interest rates rise or fall, payments do not. Can provide inflation protection — with the election of the Annual Increase Option payments can increase annually by a predetermined amount and help to keep pace with inflation. Offers Retirement Alpha — each check contains Principal, Interest and Mortality Credits.DIA payouts contain both interest and return of premium. CDs and Bonds do not require distribution of principal. Presenting Sponsor: Produced By:
  • Retirement RIOT™ Curtis V. Cloke, CLTC, LUTCF CEO / FounderThrive Income Distribution System Presenting Sponsor: Produced By: Presenting Sponsor: Produced By:
  • “We will not revert to the mean… … the authority on bondsThere is a near certain probability that thefinancially based global economy of the pasthalf-century will not return.”William H. Gross, Managing Director PIMCO • Increased Taxation • Increased volatility • Lower growth rates Presenting Sponsor: Produced By:
  • Retirement RIOT™ What do retirees want? R - Retirement I - Income O - On T - Time / TargetWhat’s Your Number! Copyright 2012– Thrive Income Distribution System® Presenting Sponsor: Produced By:
  • Psychonomics (Emotional vs. Financial)  Retirement Fears  Retirement Risks  Pension Benefits - (Pension Envy)  Social Security & Medicare (Pending Changes)Defensive  Need for… Inflation Adjusted Income Floor  Address Protection Goals for…  Extended Catastrophic Health  Preserving Legacy for HeirsOffensive  Managed Risk for…  Growth Opportunity  Periods of Hyper-inflation  Suitable Liquidity & Flexibility Presenting Sponsor: Produced By:
  • The Impossible Becomes PossibleProcess Driven When the constraints of traditional thought are Approach thrown off … our clients win. The Most for the Least Guaranteed Income Copyright 2012– Thrive Income Distribution System®Creating a Retirement Income Floor Guarantees are subject to claims paying ability of issuing company Presenting Sponsor: Produced By:
  • Guaranteed Solutions Require InsuranceWhat combination of Guaranteed* Solutions help us optimize what our clients want?Guaranteed Lifetime Single Premium Single PremiumWithdrawal Benefit Immediate Annuity Deferred Income AnnuityRider to Deferred Annuity Income NOW Income LATER Income Rider Annuitized Annuitized Withdrawals Payments Payments Copyright 2012– Thrive Income Distribution System® Presenting Sponsor: Produced By:
  • Creating a Retirement Plan is ComplexMany goals to achieve Copyright 2012– Thrive Income Distribution System® Guarantee Income Maximize Leave Returns Legacy Process Beat Inflation Minimize Minimize Risk Taxes… Meets emotional and financial needs for a lifetime 26 Presenting Sponsor: Produced By:
  • Thrive® Retirement Process Divide and Conquer Defensive Offensive ESSENTIAL INCOME ASSETS GROWTH & EXTRA INCOME ASSETS Your Assets + PayCheck PlayCheck Income Copyright 2012– Thrive Income Distribution System® Growth Value of assets needed to Value of assets not needed for create a stream of annually income is used to provideincreasing retirement income liquidity, discretionary income, with precision growth, and legacy Must be reliable and predictable Managed risk is be acceptable Presenting Sponsor: Produced By:
  • 60 59 Meet Dick and Jane ASSETS ESSENTIAL MONTHLY INCOME NEED Non Qualified - $504,583 $8,000 Dick IRA - $95,440 $7,000 Jane IRA - $95,000 $6,000 Income Gap $5,000 INCOME SOURCES $5,000 a month $4,000 3% Inflation D - $1,150 J - $950 $3,000 Pension Social $2,000 Security $1,000 Social Security D - $1,100 $0 Pension 1 5 10 15 20 25Copyright 2012– Thrive Income Distribution System® Details are simplified for ease of illustration Presenting Sponsor: Produced By:
  • Meet Dick and Jane PayCheck $695,023 PlayCheck $403,989 $8,000 $291,034 ESSENTIAL INCOME ASSETS $7,000 GROWTH & EXTRA INCOME ASSETS $6,000 2 $5,000 Total guaranteed income 1 1,091,746 $4,000 $3,000 $2,000 Tax Control 1 2 Inflation Protected Lower Fees $1,000 $0Two Guaranteed Income Sources 1 5 10 15 20 25 Case History from 2009 Copyright 2012– Thrive Income Distribution System® Details are simplified for ease of illustration Presenting Sponsor: Produced By:
  • Meet Dick and Jane $695,023 PlayCheck 5% Growth Rate $291,034 GROWTH & EXTRA INCOME ASSETS $652,604 Extra income from Growth assets and RMDs $291,034 $346,898 $144,041 $167,286 Dick’s Jane’s NQ IRA IRA $95,440 $95,000 $100,594 Potential value in 25 Years $1,310,829Over their projected life span (not guaranteed) Case History from 2009 Copyright 2012– Thrive Income Distribution System® Details are simplified for ease of illustration Presenting Sponsor: Produced By:
  • Questions? Presenting Sponsor: Produced By: Presenting Sponsor: Produced By:
  • Thank you! Presenting Sponsor: Produced By: Presenting Sponsor: Produced By: