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  1. 1. Guaranteed Income Benefit for Life (and a 7% Guaranteed Rate of Return) By: Roccy DeFrancesco, JD, CWPP, CAPP, MMB Founder: The Wealth Preservation Institute Co-Founder: The Asset Protection Society
  2. 2. Asset Allocation in a volatile world <ul><li>For many people it will make sense to allocate “X” amount of dollars to a wealth preservation/building tool that will secure your money and still give you a decent rate of return. </li></ul><ul><li>This presentation will discuss the use of Fixed Indexed Annuities (FIAs) and their unique security feature as well as how they can be used to guarantee you a predetermined income benefit for your entire life . </li></ul>
  3. 3. Security and Guarantees <ul><li>Why should you choose to use FIAs? </li></ul><ul><li>1) Your money will NEVER go backwards due downturns in the stock market. </li></ul><ul><li>2) FIAs annually lock in the gains of a measuring stock index (S&P 500) (minus dividend returns) </li></ul><ul><li>3) Tax Deferred Growth (sometimes) </li></ul><ul><li>4) Other “living benefits ” </li></ul><ul><ul><li>7% guaranteed return (accumulation value) </li></ul></ul><ul><ul><li>Guaranteed lifetime payouts </li></ul></ul><ul><ul><li>Increased payouts if there is a need for long-term care * (*Covered in a separate presentation). </li></ul></ul>
  4. 4. Guaranteed Returns and a Guaranteed Income Benefits (GIB) <ul><li>What you will learn in the following slides will truly amaze you. </li></ul><ul><li>What if I told you there is a FIA that will guarantee you a 7% rate of return (accumulation value) and a guaranteed lifetime income of: </li></ul><ul><ul><li>6% at age 70, </li></ul></ul><ul><ul><li>6.5% at age 75, </li></ul></ul><ul><ul><li>7% at age 80, and </li></ul></ul><ul><ul><li>7.5% at age 85 </li></ul></ul>
  5. 5. Income for life <ul><li>Today, many Americans are near or in retirement and have shifted their focus from “ accumulating ” assets to trying to figure out how NOT to run out of money in retirement . </li></ul><ul><li>While most Americans have their money in the stock market (IRAs, 401(k) plans, after-tax brokerage accounts, etc), many are scared that a downturn in the stock market will significantly affect their ability to retire in the desired manner. </li></ul><ul><li>While the stock market should do well over the long-term, there is NO guarantee . </li></ul>
  6. 6. Living longer <ul><li>One real problem (sort of) is that we are living longer today. </li></ul><ul><li>That means we need to put more money away for retirement or the money we put away needs to be placed somewhere that will pay a guaranteed payout for “life”. </li></ul><ul><li>Life Expectancy at age 90 is 7.9 years </li></ul><ul><li>National Vital Statistics Reports, Vol. 54, Number 14 </li></ul>
  7. 7. <ul><li>45%, 21%, 13%, 10%, 8%? The answer is 45% </li></ul>Recovery (many people don’t have time or want to take that risk) <ul><li>If the market went up 12% and then 10% but then lost 19% and 15% </li></ul><ul><li>How much would it take to recover the next year? </li></ul>
  8. 8. Would you like a financial product that would Guarantee you a 7% Rate of Return? <ul><li>Would you be happy with a guaranteed annual rate of return of 7% ? </li></ul><ul><li>I believe most people would which is why I put together this educational presentation. </li></ul><ul><li>The 7% number is calculated for the “ accumulation ” value not the “ account ” value. </li></ul><ul><li>As you’ll see in the next slide, the special FIAs have both an accumulation account and a real account value. </li></ul><ul><li>The “accumulation” value is used when calculating your GIB. </li></ul>
  9. 9. Difference between Accumulation value and Account value   Accumulation Value Account Value Issue Age 55 $100,000 $100,000 Year 1 Age 56 $107,000 $103,600 Year 2 Age 57 $114,490 $107,329 Year 3 Age 58 $122,504 $111,193 Year 4 Age 59 $131,080 $115,196 Year 5 Age 60 $140,255 $119,343 Year 6 Age 61 $150,073 $123,639 Year 7 Age 62 $160,578 $128,090 Year 8 Age 63 $171,819 $132,702 Year 9 Age 64 $183,846 $137,479 Year 10 Age 65 $196,715 $142,428
  10. 10. Guaranteed Income Benefit (GIB) <ul><li>If you choose to opt for the Accumulation Value, you must take the guaranteed payout. </li></ul><ul><li>This payout will be guaranteed for life. </li></ul><ul><ul><li>Although, if you need a lump some distribution from the FIA, you can get it although it just reduces your income benefit accordingly. </li></ul></ul><ul><ul><li>For example, if your GIB is $20,000 a year and you removed 50% of the account value from the FIA because you needed immediate cash, your GIB would be reduced by 50% (down to $10,000 a year). </li></ul></ul><ul><ul><li>This product does NOT require you to annuitize to receive the GIB. </li></ul></ul>
  11. 11. How do you calculate the GIB? <ul><li>It’s really quite easy to calculate. </li></ul><ul><li>You simply take your age at the time you trigger the GIB and subtract 10. </li></ul><ul><li>Example for a 70, 75 or 80 year old : </li></ul><ul><ul><li>70 – 10 = 60. Your income benefit is 6% (for life). </li></ul></ul><ul><ul><li>75 – 10 = 65. Your income benefit is 6.5% (for life). </li></ul></ul><ul><ul><li>80 – 10 = 70. Your income benefit is 7% (for life). </li></ul></ul><ul><ul><li>The maximum benefit is 8% (unless you need LTC) </li></ul></ul><ul><li>Remember, the GIB is based on the “ Accumulation ” value. </li></ul>
  12. 12. Example <ul><li>79-year old with $500,000 in a FIA with a GIB rider. </li></ul><ul><li>The client would receive a GLB of 6.9% (79-10 = 6.9 minus his/her age). </li></ul><ul><li>The GIB for life would be $34,500 a year for life. </li></ul><ul><li>Do you know of a stock, mutual fund, or other retirement tool that will Guarantee a 7% rate of return and a GIB for life ? </li></ul><ul><li>I don’t know of one that even comes close which is why this financial tool is so powerful and protective. </li></ul>
  13. 13. What if you are 50 years old? Is this a product you should use? <ul><li>If you had $500,000 (let’s say in an IRA or qualified retirement plan), where would you have it invested? </li></ul><ul><li>Stock and mutual funds. </li></ul><ul><li>If the stock market tanks , what happens to your money? </li></ul><ul><ul><li>It goes in the tank with it. </li></ul></ul><ul><li>What would be your Guaranteed “accumulation” value if you used the FIA I have been discussing in this presentation? </li></ul><ul><li>$2,070,281 at age 69. </li></ul><ul><li>If you could reposition $500,000 at age 50 with a guarantee that the value would be over $2,000,000 at age 69 , would that interest you? </li></ul><ul><li>It should. </li></ul>
  14. 14. Guaranteed Income Benefit <ul><li>With money in the stock market, what is your GIB at age 69? </li></ul><ul><li>The answer is, we have no idea . If the stock market does well, it could be high. If the stock market does poorly, it could be very low. </li></ul><ul><li>When in retirement you should not have such worries. </li></ul><ul><li>With the 7% guaranteed FIA I’ve been discussing, your guaranteed lifetime income would be 5.9% x $2,070,281 = $122,146 every year until death. </li></ul>
  15. 15. What happens when you die? <ul><li>First, remember that the FIA I’ve been discussing has both an accumulation account and a real account value. </li></ul><ul><li>When the insurance company pays you your lifetime income, it will slowly deplete your account value. </li></ul><ul><li>When you die, the real account value is passed to your heirs. </li></ul>
  16. 16. What’s the cost of the GIB Rider and other specifications? <ul><li>Charge is .4% of Policy Account Value for first 10 Rider years </li></ul><ul><li>Charge is .5% of Policy Account Value for Rider years 11+ </li></ul><ul><li>The only time the .4% or .5% fee comes into play is: </li></ul><ul><ul><li>if the you want to take withdrawals or surrender the annuity for the account value, or </li></ul></ul><ul><ul><li>when you die, the actual account value is reduced by this fee prior to passing the remainder to your heirs. </li></ul></ul>
  17. 17. Summary <ul><li>What was the guaranteed rate of return on your wealth building tools over the last 1-5-10+ years? </li></ul><ul><ul><li>Most people have little or no money in a tool that guarantees any rate of return (let alone a 7% rate of return). </li></ul></ul><ul><li>What was your actual rate of return? </li></ul><ul><ul><li>Most people earned less than 1.87% if the money was invested in mutual funds (DALBAR 2009). </li></ul></ul><ul><li>If you do not have some of your money in a product that will guarantee you a 7% rate of return, you are making a tremendous mistake. </li></ul><ul><li>Is your money in a wealth building tool that will “guarantee” that you will not run out of money in retirement ? </li></ul><ul><li>If not and if you want to secure a lifetime income, you should strongly consider using the FIA I discussed in this presentation. </li></ul><ul><li>*For specific details on this FIA, consult your trusted financial planner and/or insurance advisor. </li></ul>