Challenges Pre Retire

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The reality we are facing in todays retirees

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Challenges Pre Retire

  1. 1. Challenges that may impact your retirement<br />Seminar and Insurance Sales Presentation<br />1008<br />RIO1341 1010<br />
  2. 2. 2<br />1 Retirement – what’s changed?<br />2 The challenges you may face<br />3 A way to invest, prepare and protect<br />Today’s objectives<br />
  3. 3. 3<br />Retirement – what’s changed?<br />Shift to 401(k) – are savings enough?<br />20%<br />$121,202<br />percentage of employees who have a pension plan<br />average 401(k) balance<br />As of year end 2006.<br />401(k) Plan Asset Allocation, Account Balances and Loan Activity in 2006 – www.ici.org<br />Deloitte – Annual 401(k) Benchmarking Survey 2005/2006 Edition<br />
  4. 4. 4<br />LIMRA – Working in Retirement – 2007<br />Retirement – what’s changed?<br />24% of retirees work in retirement<br />86% of pre-retirees have not ruled out working <br />27% need extra income<br />14% cannot afford to retire<br />
  5. 5. 5<br />Wall Street Journal Online – September 2007<br />Retirement – what’s changed?<br />Mortgages in retirement<br />Retirees ages 65 - 74<br />19% in 1992<br />32% in 2004<br />
  6. 6. 6<br />Retirement – what’s changed?<br />Social Security: will it be there for you?<br />Trust fund assets projected to be exhausted 2041<br />Social Security Board of Trustees – March 2008 <br />
  7. 7. 7<br />1974<br />2030<br />Projected<br />Source: Research on Potential New Products for Retirement Income, FCNBD, May 2006<br />Retirement – what’s changed?<br />Personal assets and work<br />
  8. 8. 8<br />Example<br />Your information<br />Desired Annual Retirement Income<br />$100,000<br />?<br />Pension Income<br />– $24,000<br />?<br />Will you be prepared?<br />:<br />How much money might you need to retire?<br />Social Security<br />– $25,000<br />?<br />Income Gap<br />$51,000<br />?<br />Desired Withdrawal Rate<br />.04 (4%)<br />?<br />Personal Savings Needed<br />$1,275,000<br />?<br />
  9. 9. 9<br />Challenges of retirement<br />Longevity<br />Inflation<br />Health care costs<br />Asset allocation<br />Excess withdrawal<br />
  10. 10. 10<br />People are living longer<br />Probability of a 65-year-old couple needing income for:<br />Annuity 2000 Mortality Table, Society of Actuaries<br />Longevity risk<br />
  11. 11. Cost of goods and services are increasing<br />11<br />Source: U.S. Postal Service 2008<br />Inflation<br />
  12. 12. Health care costs outpace inflation<br />Average annual price increases – <br /> years 2000-2005<br />12<br />Physician & clinical services:<br />Prescription drugs:<br />10.7%<br />7.9%<br />Inflation:<br />2.5%<br />National Center for Health Statistics – Health, United States 2007<br />Health care costs<br />
  13. 13. 13<br />Long term return potential.<br />Significant potential. <br />Volatility.<br />Lower return potential.<br />Little volatility.<br />Risk: too aggressive or too conservative? <br />Assumptions: $100,000 investment 1988-2007. Past performance does not guarantee future results. The investment return and principal<br />value of a security will fluctuate with market conditions so that when redeemed, may be worth more or less than their original cost. <br />The S&P 500 Index is a list of securities frequently used as a measure of U.S. stock market performance.<br />The Consumer Price Index (CPI) is an inflationary indicator that measures the change in the cost of goods purchased by the average U.S. household. <br />Treasury Bills (TBills) are a short-term obligation of the U.S. Treasury having a maturity period of one year or less and sold at a discount from face value. <br />The indices represented in the grid are unmanaged, do not incur expenses and cannot be purchased directly by investors. <br />The historical performance shown is for illustrative purposes only and does not represent the performance of any particular product or underlying fund.<br />
  14. 14. 14<br />Average annual return 1988 – 2007<br />11.8%<br />4.5%<br />3.0%<br />Average Investor<br />S&P 500 Index<br />Inflation<br />Equity investing<br />Source: Dalbar, Inc., QAIB Study, 2008. This hypothetical example is for illustrative purposes, and is not representative of any MassMutual product. The S&P 500 Index is a list of securities frequently used as a measure of U.S. stock market performance. Indices are not available for direct investment.<br />
  15. 15. 15<br />Diversification through asset allocation<br /> Past performance does not guarantee future results. The investment return and principal value of a security will fluctuate with market conditions so that when redeemed, <br /> may be worth more or less than their original cost.<br /> Asset allocation does not ensure a profit and does not protect against loss in a declining market.<br />The indices represented in the grid are unmanaged, do not incur expenses and cannot be purchased directly by investors. <br />The historical performance shown is for illustrative purposes only and does not represent the performance of any particular product or underlying fund. <br />Source: S&P Micropal, February 2008<br />
  16. 16. 16<br />Past performance does not guarantee future results.<br />The indices represented in the grid are unmanaged, do not incur expenses and cannot be purchased directly by investors. The historical performance shown is for illustrative purposes only and does not represent the performance of any particular product or underlying fund.<br />Diversification through asset allocation<br />
  17. 17. 17<br /> Probability of meeting income needs<br />Various withdrawal rates and portfolio allocations over a 25-year retirement<br />Stocks are represented by the Standard & Poor&apos;s 500, which is an unmanaged group of securities and considered to be representative of the stock market in general. Bonds are represented by the five year U.S. government bond, inflation by the Consumer Price Index and mutual fund expenses from Morningstar. Annual investment expenses were assumed to be 0.94% for stock mutual funds and 0.82% for bond mutual funds. The inputs used by Morningstar are historical 1926-2006 figures. The data assumes reinvestment of income and does not account for taxes or transaction costs. An investment cannot be made directly in an index.<br />IMPORTANT: Projections generated by Morningstar regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Results may vary over time and with each simulation. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2007 Morningstar, Inc. 3/1/2007. All rights reserved.<br />Excess withdrawal risk<br />
  18. 18. 18<br />Don’t leave your retirement to chance<br />Consult a financial professional.<br />A financial professional will help you:<br />Establish Goals<br />Address Challenges<br />Develop a Strategy<br />Monitor and Update Strategy<br />
  19. 19. Steps to develop a retirement income strategy<br />Planning your retirement income strategy:<br />1<br />Gather information<br />2<br />Formulate a strategy<br />3<br />Put strategy into action<br />
  20. 20. Set Up <br />An Appointment <br />Today!<br />
  21. 21. Variable annuities are sold by prospectus. Before purchasing a variable annuity contract, investors should carefully consider the investment objectives, risks, charges and expenses of the variable annuity contract and its underlying investment choices. For this and other information, obtain the prospectuses for the variable annuity contract and its underlying investment choices from your registered representative. Please read the prospectuses carefully before investing or sending money.<br />
  22. 22. 22<br />Thank You!!<br />Questions & Answers<br />
  23. 23. 23<br />The information provided is not written or intended as tax or legal advice and may not be relied on for purposes of avoiding any federal tax penalties. MassMutual, its employees and representatives are not authorized to give tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel.<br />Annuity products are issued by Massachusetts Mutual Life Insurance Company and C.M. Life Insurance Company. C.M. Life Insurance Company, 100 Bright Meadow Boulevard, Enfield, CT 06082, is non-admitted in New York and is a subsidiary of Massachusetts Mutual Life Insurance Company, 1295 State Street, Springfield, MA 01111-0001.<br />Principal Underwriter:MML Distributors, LLC, 1295 State Street, Springfield, MA 01111-0001. Wholly owned subsidiary of Massachusetts Mutual Life Insurance Company.<br />
  24. 24. 24<br />© 2008 Massachusetts Mutual Life Insurance Company, Springfield, MA. All rights reserved. www.massmutual.com<br />MassMutual Financial Group is a marketing name for Massachusetts Mutual Life Insurance Company (MassMutual)<br /> and its affiliated companies and sales representatives.<br />

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