1 Retirement Life™Learn How to “Retire Without Risk” By:Roccy DeFrancesco, JD, CWPP, CAPP, MMB Founder: The Wealth Preservation Institute Co-Founder: The Asset Protection Society Author of: Retiring Without Risk Copyright 2010
2 Where is the “best” place to build retirement wealth? Diversification. Having said that, this presentation will focus on the proper use of Retirement Life™ (a cash value life insurance policy) to build a tax-favorable retirement nest egg.
3 Why Retirement Life™? Why not stocks and mutual funds? The answer is simple: 1) Stocks and mutual funds have NO downside protection. 2) They are also tax-hostile and very expensive. In 2008 equity funds posted a one-year return of -39.54%*. *Lipper
4 Mutual Fund Performance “The sad truth of the matter is, that over time the vast majority– approximately 80% - of mutual funds underperform the overall stock market.” The Motley Fool
5 What about Stock Indexes? They too provide No Downside Protection! S&P 500 in 2008 Retirement Life™ in 2008 -37.00% 0.00% S&P 500 in 1998-2008 Retirement Life™ in 1998-2008 5.91% -1.40%
The Money Slide What did the average investor return over the last 20-years? 1.87% 6
Recovering from loss Most people do not understand the following numbers. Today, most people would rather not go backwards. 7
8 Funding Retirement Life™ to build your retirement nest egg Policy design is critical. Funding the policy over 5-7 years (or more) is ideal to minimize costs and maximize cash value and growth. Cash in a LI policy grows tax-free* and can be removed tax-free** in retirement. *(No capital gains or dividend taxes on gains) **(No income taxes when removed in retirement with a proper design)
9 $ Yr. 4 Mortality & Expense Charges $ Yr. 3 $ Yr. 2 $ Yr. 1 Funding Retirement Life™ A Tax Free Non-Qualified Retirement Plan Maximum Premiums Cash Contributions Compound Interest $ Year 5 Minimum Death Benefit
10 What is Retirement Life™? Retirement Life™ is the best cash value life insurance policy in the marketplace to help clients build wealth for retirement in a safe, secure, and tax-free manner.
11 Retirement Life™ Continued -Minimum return guarantee every year while still allowing the cash value in the policy to grow at market rates every year. Growth pegged to the S&P 500 index. Principal protection (no downside due to negative market returns). From 1988-2008, the S&P 500 still averaged in excess of 8%* (even though the stock market had a “crash” of -46% from 2000-2002 and -59% from high to the low of 2007-2008). *(Moneychimp.com)
12 Protective Wealth Building Retirement Life™ locks in the gains in up years and does not participate in the down years. $115,500 $110,000 5% 17.6% 10% S&P 500 Gains Are Locked In -15% $100,000 $98,175 5% $93,500
13 Nothing is for free Because of the contractual guarantees, Retirement Life™ policies take away some of the upside potential of the policies with caps on the growth. Caps vary per company and crediting method 10 to16% annually If you are reaching for returns in excess of16% a year, then you would not want to use Retirement Life™ to reach for those gains.
14 Retirement Life™ (continued) The premiums allocated to cash growth in a Retirement Life™ are used to purchase income producing bonds. Income from the bonds (which varies) is used to purchase options in a stock index (typically the S&P 500 index). In up years, the options pay off and provide positive returns in the Retirement Life™ policy.
15 Continued Retirement Life™ is a “supplemental retirement plan” plan for those who: do not like their stock portfolios tanking with the market. do like: Annual locking of returns; Upside growth pegged to indexes which outperform most mutual funds; No annual taxes on growth; and No taxes when removing money from the policy in retirement.
16 Question? Would you have been happy to earn a tax free rate of return over the last 20 years of between 7.5%to9.1%? With no risk of loss due to downturns in the stock market? With a tool that self completesto protect your family in case you die prior to accumulating a retirement nest egg? Remember the average mutual fund investor earned returns of only 1.87%.
17 Wealth Building Example: Brokerage Account vs. Retirement Life™ Assume you are a 45 year old male in good health and fund 15,000 after-tax into a mutual fund every year from ages 45-65. Annual expenses in an actively traded mutual fund: 20% blended capital gains and dividend taxes 1.2% mutual fund expense* No money management fee Let’s compare that using the same funding terms using Retirement Life™. The assumed gross rate of return will be 8% annually. Assume you are in the 25% income tax bracket. *(Average mutual fund expense is in approximately 1.5% annually)
18 Retirement Income Annually from your mutual funds you could remove: $44,717(from ages 66-85) Annually you could withdrawal from Retirement Life™: $77,739(from ages 66-85) How much more after tax retirement cash flow did the Retirement Life™ return? $33,022 every year for 20 years. $660,440total over the 20 year period.
19 This is the power of building wealth through Retirement Life™
20 Plus Retirement Life™ Protects your Family Comparing what passes to your heirs at death.
21 Summary Again, a diversified wealth building strategy is always the best way to approach Retirement. However, if you want to “Retire Without Risk,” you should allocate money to Retirement Life™ which has the following characteristics No Downside Risk due to market forces Good upside growth potential pegged to the S&P 500 index Annual locking features Tax-free growth and tax-free retirement cash flow Do not forget about the death benefit.