Call us to learn how to guarantee retirement income while demanding less from your portfolio

1. DEFERRED INCOME
ANNUITIES:
Reducing Longevity Risk
in Retirement

2. A History of Longevity Concerns
• Tontines (developed in the 1600’s) – Individuals would invest and
participate as part of a pooled “annuity”. As participants passed
away, those remaining received a proportionate increase in income.
• With actuarial advancements, modern day Tontines are issued by
insurance carriers and are commonly known as single premium
immediate annuities (SPIA) and deferred income annuities (DIA).
• These tools are generally purchased with a lump sum of assets and to
generate a fixed amount of income immediately (SPIA) or at some
point in the future (DIA). Income is derived through a combination of
return of principal as well as a prescribed crediting of interest and
mortality components.

3. DIA Developments
• Growing Demand
• Sales: $1 billion in 2012, Almost $1 billion a quarter in 2015
• Received Regulatory Blessing:
• QLAC regulation passed in 2014 – Over a dozen offerings available today
• Focus of Research
• ValMark & University of Akron Published Article in 2013
• Wade Pfau Ph. D., CFA
• Professor of Retirement Income at American College
• Why Retirees should choose DIAs over SPIAs – September 2013
• Reduce Retirement Costs with Deferred Income Annuity – July 2015
• Milliman Financial Risk Management
• Global leader in financial risk management providing investment advisory, hedging, and consulting services
on $150 billion of global assets (as of 2014)
• The Six Percent Rule – August 2014
• Moshe Milevsky Ph. D.
• York University in Toronto. He has published 12 books, over 60 peer-reviewed articles and is on the editorial
board of numerous scholarly journals.
• Bonding with Deferred Income Annuities – 2015
• Optimal Purchasing of Deferred Income Annuities When Payout Yields are Mean-Reverting - 2015

4. Ruin Minimization
Moshe Milevsky has written multiple articles on the concept of “ruin
minimization.” This is a concept of predicting the probability of
retirement ruin based on various attributes of a client’s retirement plan
including: remaining life span, average return, standard deviation, and
spending rate.
A DIA can be used to decrease the probability of ruin by reducing and
defining the average lifespan of the portfolio by setting an end date on
retirement and relieving pressure on the investment portfolio by
decreasing required returns and risk.

5. Setting an End Date
• Younger, healthier, individuals can use DIAs to provide significant income to
offset retirement needs beginning at ages as late as 85. This allows planning
strategies utilized on remaining assets to incorporate finite timeframes.
• (Ages 65 - 85 = 20 Years)
• Furthermore, DIAs provide stability for the plan in place of traditional fixed
income investments that are subject to rising interest rate risks, allowing the
current portfolio to be skewed toward growth investments.

6. Planning over Shorter Time Horizons
Planning over a 20 year time
frame is proven to have a better
success rate than planning over
a 30 year time frame
Source: T. Rowe Price, http://individual.troweprice.com/retail/pages/retail/applications/investorMag/2015/spring/cover-story/index.jsp

8. Average Return and Standard Deviation
• In today’s low interest rate environment, DIAs can help supplement
fixed income yields due to the mortality component of their payouts.
• DIAs generate competitive long term IRRs on expected cash flows,
alleviating inflation and longevity risks in retirement.
• Example: Male age 65 invests in DIA to generate income from 85+
• Live to Age 90 – IRR on investment 4.18%
• Live to age 95 – IRR on investment 6.80%
• Live to age 100 – IRR on investment 7.90%

9. Portfolio Analysis
• Married couple (each age 65)
• Current portfolio of $2.5M
• Gross annual income needs of $100,000, adjusted for inflation at 3%
• Reduced to $75,000 after first death.
• Life Expectancy:
• Male Age 88, Female Age 95 (Joint Life Expectancy)
• Male Age 95, Female Age 100 (25% Probability of Survival Post Joint Life Expectancy)
• Male Age 99, Female Age 102 (10% Probability of Survival Post Joint Life Expectancy)
• Clients live to age 100
• Investment Scenarios:
• Default – All retirement funds held in a diversified Traditional Portfolio
• Alternative – Purchased a DIA (joint life with 50% survivor) with a portion of the
Traditional Portfolio with income commencing at age 85
* This case study is hypothetical in nature
Goal: Examine how much return is needed from the
retirement portfolio in order to make plan sustainable.

10. Joint Life Expectancy
*25% Income Reduction on First Death
No DIA
Target 3.66%
Portfolio
Return
DIA Purchase
ReturnTarget
3.29%
Portfolio
Traditional Portfolio
Traditional Portfolio with Longevity
Insurance
3.66% 4.51% 3.29%
$ (2,500,000) $ (396,581) $ (2,103,419)
65 $ 100,000 $ - $ 100,000
66 $ 103,000 $ - $ 103,000
67 $ 106,090 $ - $ 106,090
68 $ 109,273 $ - $ 109,273
69 $ 112,551 $ - $ 112,551
70 $ 115,927 $ - $ 115,927
71 $ 119,405 $ - $ 119,405
72 $ 122,987 $ - $ 122,987
73 $ 126,677 $ - $ 126,677
74 $ 130,477 $ - $ 130,477
75 $ 134,392 $ - $ 134,392
76 $ 138,423 $ - $ 138,423
77 $ 142,576 $ - $ 142,576
78 $ 146,853 $ - $ 146,853
79 $ 151,259 $ - $ 151,259
80 $ 155,797 $ - $ 155,797
81 $ 160,471 $ - $ 160,471
82 $ 165,285 $ - $ 165,285
83 $ 170,243 $ - $ 170,243
84 $ 175,351 $ - $ 175,351
85 $ 180,611 $ 180,000 $ 611
86 $ 186,029 $ 180,000 $ 6,029
87 $ 191,610 $ 180,000 $ 11,610
88 $ 148,019 $ 90,000 $ 58,019
89 $ 152,460 $ 90,000 $ 62,460
90 $ 157,033 $ 90,000 $ 67,033
91 $ 161,744 $ 90,000 $ 71,744
92 $ 166,597 $ 90,000 $ 76,597
93 $ 171,595 $ 90,000 $ 81,595
94 $ 176,742 $ 90,000 $ 86,742
$-
$50,000
$100,000
$150,000
$200,000
$250,000
65 67 69 71 73 75 77 79 81 83 85 87 89 91 93
Traditional Portfolio
$-
$50,000
$100,000
$150,000
$200,000
$250,000
65 67 69 71 73 75 77 79 81 83 85 87 89 91 93
Traditional Portfolio with Longevity Insurance

11. *25% Income Reduction on First Death
25% Probability of Survival
No DIA
Target 4.69%
Portfolio
Return
DIA Purchase
Target 3.55%
Portfolio
Return
$-
$50,000
$100,000
$150,000
$200,000
$250,000
65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99
Traditional Portfolio
$-
$50,000
$100,000
$150,000
$200,000
$250,000
65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99
Traditional Portfolio with Longevity Insurance
Traditional Portfolio Traditional Portfolio with Longevity Insurance
4.69% 6.77% 3.55%
$ (2,500,000) $ (396,581) $ (2,103,419)
65 $ 100,000 $ - $ 100,000
66 $ 103,000 $ - $ 103,000
67 $ 106,090 $ - $ 106,090
68 $ 109,273 $ - $ 109,273
69 $ 112,551 $ - $ 112,551
70 $ 115,927 $ - $ 115,927
71 $ 119,405 $ - $ 119,405
72 $ 122,987 $ - $ 122,987
73 $ 126,677 $ - $ 126,677
74 $ 130,477 $ - $ 130,477
75 $ 134,392 $ - $ 134,392
76 $ 138,423 $ - $ 138,423
77 $ 142,576 $ - $ 142,576
78 $ 146,853 $ - $ 146,853
79 $ 151,259 $ - $ 151,259
80 $ 155,797 $ - $ 155,797
81 $ 160,471 $ - $ 160,471
82 $ 165,285 $ - $ 165,285
83 $ 170,243 $ - $ 170,243
84 $ 175,351 $ - $ 175,351
85 $ 180,611 $ 180,000 $ 611
86 $ 186,029 $ 180,000 $ 6,029
87 $ 191,610 $ 180,000 $ 11,610
88 $ 197,359 $ 180,000 $ 17,359
89 $ 203,279 $ 180,000 $ 23,279
90 $ 209,378 $ 180,000 $ 29,378
91 $ 215,659 $ 180,000 $ 35,659
92 $ 222,129 $ 180,000 $ 42,129
93 $ 228,793 $ 180,000 $ 48,793
94 $ 235,657 $ 180,000 $ 55,657
95 $ 182,045 $ 90,000 $ 92,045
96 $ 187,506 $ 90,000 $ 97,506
97 $ 193,131 $ 90,000 $ 103,131
98 $ 198,925 $ 90,000 $ 108,925
99 $ 204,893 $ 90,000 $ 114,893

12. 10% Probability of Survival
*25% Income Reduction on First Death
DIA Purchase
Target 3.68%
Portfolio
Return
No DIA
Target 5.02%
Portfolio
Return
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101
Traditional Portfolio
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99 101
Traditional Portfolio with Longevity Insurance
Traditional Portfolio
Traditional Portfolio with
Longevity Insurance
5.02% 7.33% 3.68%
$ (2,500,000) $ (396,581) $ (2,103,419)
65 $ 100,000 $ - $ 100,000
66 $ 103,000 $ - $ 103,000
67 $ 106,090 $ - $ 106,090
68 $ 109,273 $ - $ 109,273
69 $ 112,551 $ - $ 112,551
70 $ 115,927 $ - $ 115,927
71 $ 119,405 $ - $ 119,405
72 $ 122,987 $ - $ 122,987
73 $ 126,677 $ - $ 126,677
74 $ 130,477 $ - $ 130,477
75 $ 134,392 $ - $ 134,392
76 $ 138,423 $ - $ 138,423
77 $ 142,576 $ - $ 142,576
78 $ 146,853 $ - $ 146,853
79 $ 151,259 $ - $ 151,259
80 $ 155,797 $ - $ 155,797
81 $ 160,471 $ - $ 160,471
82 $ 165,285 $ - $ 165,285
83 $ 170,243 $ - $ 170,243
84 $ 175,351 $ - $ 175,351
85 $ 180,611 $ 180,000 $ 611
86 $ 186,029 $ 180,000 $ 6,029
87 $ 191,610 $ 180,000 $ 11,610
88 $ 197,359 $ 180,000 $ 17,359
89 $ 203,279 $ 180,000 $ 23,279
90 $ 209,378 $ 180,000 $ 29,378
91 $ 215,659 $ 180,000 $ 35,659
92 $ 222,129 $ 180,000 $ 42,129
93 $ 228,793 $ 180,000 $ 48,793
94 $ 235,657 $ 180,000 $ 55,657
95 $ 242,726 $ 180,000 $ 62,726
96 $ 250,008 $ 180,000 $ 70,008
97 $ 257,508 $ 180,000 $ 77,508
98 $ 265,234 $ 180,000 $ 85,234
99 $ 204,893 $ 90,000 $ 114,893
100 $ 211,040 $ 90,000 $ 121,040
101 $ 217,371 $ 90,000 $ 127,371

13. No DIA
Target 4.99%
Portfolio
Return
Both Live through Age 100
DIA Purchase
Target 3.51%
Portfolio
Return
Traditional
Portfolio
Traditional Portfolio with Longevity
Insurance
4.99% 7.41% 3.51%
$ (2,500,000) $ (396,581) $ (2,103,419)
65 $ 100,000 $ - $ 100,000
66 $ 103,000 $ - $ 103,000
67 $ 106,090 $ - $ 106,090
68 $ 109,273 $ - $ 109,273
69 $ 112,551 $ - $ 112,551
70 $ 115,927 $ - $ 115,927
71 $ 119,405 $ - $ 119,405
72 $ 122,987 $ - $ 122,987
73 $ 126,677 $ - $ 126,677
74 $ 130,477 $ - $ 130,477
75 $ 134,392 $ - $ 134,392
76 $ 138,423 $ - $ 138,423
77 $ 142,576 $ - $ 142,576
78 $ 146,853 $ - $ 146,853
79 $ 151,259 $ - $ 151,259
80 $ 155,797 $ - $ 155,797
81 $ 160,471 $ - $ 160,471
82 $ 165,285 $ - $ 165,285
83 $ 170,243 $ - $ 170,243
84 $ 175,351 $ - $ 175,351
85 $ 180,611 $ 180,000 $ 611
86 $ 186,029 $ 180,000 $ 6,029
87 $ 191,610 $ 180,000 $ 11,610
88 $ 197,359 $ 180,000 $ 17,359
89 $ 203,279 $ 180,000 $ 23,279
90 $ 209,378 $ 180,000 $ 29,378
91 $ 215,659 $ 180,000 $ 35,659
92 $ 222,129 $ 180,000 $ 42,129
93 $ 228,793 $ 180,000 $ 48,793
94 $ 235,657 $ 180,000 $ 55,657
95 $ 242,726 $ 180,000 $ 62,726
96 $ 250,008 $ 180,000 $ 70,008
97 $ 257,508 $ 180,000 $ 77,508
98 $ 265,234 $ 180,000 $ 85,234
99 $ 273,191 $ 180,000 $ 93,191
100 $ 281,386 $ 180,000 $ 101,386
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99
Traditional Portfolio
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99
Traditional Portfolio with Longevity Insurance

14. Consume & Replace
DIA Purchase
Target 4.99%
Portfolio
Return
No DIA
Target 4.99%
Portfolio
Return
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99
Traditional Portfolio
Traditional Portfolio Income Need
$-
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
65 67 69 71 73 75 77 79 81 83 85 87 89 91 93 95 97 99
Traditional Portfolio with Longevity Insurance
DIA Traditional Portfolio Income Need Insurance Premiums
Traditional Portfolio
Traditional Portfolio with Longevity Insurance
Traditional Portfolio
Deferred Income
Annuity
Insurance
Premiums
4.99% 4.99% 7.41% DB - $2.4M
$ (2,500,000) $ (2,083,554) $ (440,646) $ 24,200
65 $ 100,000 $ 124,200 $ - $ 24,200
66 $ 103,000 $ 127,200 $ - $ 24,200
67 $ 106,090 $ 130,290 $ - $ 24,200
68 $ 109,273 $ 133,473 $ - $ 24,200
69 $ 112,551 $ 136,751 $ - $ 24,200
70 $ 115,927 $ 140,127 $ - $ 24,200
71 $ 119,405 $ 143,605 $ - $ 24,200
72 $ 122,987 $ 147,187 $ - $ 24,200
73 $ 126,677 $ 150,877 $ - $ 24,200
74 $ 130,477 $ 154,677 $ - $ 24,200
75 $ 134,392 $ 158,592 $ - $ 24,200
76 $ 138,423 $ 162,623 $ - $ 24,200
77 $ 142,576 $ 166,776 $ - $ 24,200
78 $ 146,853 $ 171,053 $ - $ 24,200
79 $ 151,259 $ 175,459 $ - $ 24,200
80 $ 155,797 $ 179,997 $ - $ 24,200
81 $ 160,471 $ 184,671 $ - $ 24,200
82 $ 165,285 $ 189,485 $ - $ 24,200
83 $ 170,243 $ 194,443 $ - $ 24,200
84 $ 175,351 $ 199,551 $ - $ 24,200
85 $ 180,611 $ 4,811 $ 200,000 $ 24,200
86 $ 186,029 $ 10,229 $ 200,000 $ 24,200
87 $ 191,610 $ 15,810 $ 200,000 $ 24,200
88 $ 197,359 $ 21,559 $ 200,000 $ 24,200
89 $ 203,279 $ 27,479 $ 200,000 $ 24,200
90 $ 209,378 $ 33,578 $ 200,000 $ 24,200
91 $ 215,659 $ 39,859 $ 200,000 $ 24,200
92 $ 222,129 $ 46,329 $ 200,000 $ 24,200
93 $ 228,793 $ 52,993 $ 200,000 $ 24,200
94 $ 235,657 $ 59,857 $ 200,000 $ 24,200
95 $ 242,726 $ 66,926 $ 200,000 $ 24,200
96 $ 250,008 $ 74,208 $ 200,000 $ 24,200
97 $ 257,508 $ 81,708 $ 200,000 $ 24,200
98 $ 265,234 $ 89,434 $ 200,000 $ 24,200
99 $ 273,191 $ 97,391 $ 200,000 $ 24,200
100 $ 281,386 $ 105,586 $ 200,000 $ 24,200

15. Disclosures
3 The asset allocations include short-term bonds: 60/40 includes 60% stocks, 30% bonds, and 10% short-term bonds; 40/60 includes 40% stocks, 40% bonds, and 20% short-term bonds; and 20/80
is composed of 20% stocks, 50% bonds, and 30% short-term bonds.
4 T. Rowe Price has analyzed a variety of retirement spending strategies using computer simulations to determine the likelihood of “success” (having at least $1 remaining in the portfolio at the
end of the retirement period) for each strategy shown as percentages in the How Much Can You Spend in Retirement? table. The analysis for each retirement strategy is based on running 10,000
hypothetical potential market scenarios that account for a wide variety of return possibilities. The initial withdrawal amount is the percentage of assets withdrawn at the beginning of the first year
of retirement. The annual amount withdrawn is increased by 3% each year for inflation. Investment scenarios are based on hypothetical (not historical) annual rates of return for the three asset
classes represented in the portfolio mixes. The compound annual growth rate assumptions of 8.0% for stocks, 5.3% for bonds, and 4.4% for short-term bonds are based on our best estimates for
future long-term periods. These examples only present a range of possible outcomes. Actual results will vary, and such results may be better or worse than the simulation scenarios.
This study is hypothetical in nature and does not provide legal, tax, or account advice.
Any tax advice contained herein is of a general nature. Further, you should seek specific tax advice from your tax professional before pursuing any idea contemplated herein. This advice is being
provided solely as an incidental service to our business as (insurance professionals, financial planner, investment advisor, securities broker)
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