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Are you prepared to lead the
retirement revolution?
When Im Sixty-Five
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Table of contents
Leading the retirement revolution
Introduction 1
The advent of the retirement revolution
From counter culture to counter retirement 2
Getting what you want and what you need 3
Confronting the five challenges
of the new retirement
Retirement challenges are a-changin, too 4
Planning to lead the retirement revolution
A time to sow, a time to reap 8
Finding potential solutions 10
Get together with your financial advisor 12
Conclusion
Volunteer for the revolution 13
The thing the Sixties did was to show us
the possibilities and the responsibility that
we all had. It wasnt the answer. It just
gave us a glimpse of the possibility.
John Lennon
Die Cut
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Are you prepared to lead the
retirement revolution?
Retirement, as such, is at an end. Its replacement focuses on activity, not rest;
on opportunity, not limits; and on beginnings, not endings. It provides the
rebirth of your dreams, the reforging of your career, the redesign of your life.
However, the ability to realize these changes to their fullest requires a renovation
of how income is created and maintained so that as a retiree, if that word still
applies, you can transform your life and the world around you.
Preparing for the next generation
of retirement
Lincoln Financial Group wants to
help you plan a retirement that defies
traditional notions, a retirement that
inspires others, a retirement that
allows you to chase your ideal of a
more carefree lifestyle.
When Im Sixty-Five is in the spirit of
the Sixties and its legacy, for people
who have lived revolutionary lives
of passion, of self-determination,
of conscience, and who dont want
their retirement to be any different.
This brochure is designed to help
you prepare for the new retirement,
overcome its new challenges, and
ultimately implement an income stream
for a new life as individual as yourself.
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The transformation of
retirement over the decades
In 1950, retirement lasted
on average less than three
and a half years, because life
expectancy was only 68.2 years!
Today, a retirement revolution is
taking place as millions confront
the possibility of living for over
25 years in retirement. What
will you do? What do you have
planned? More importantly, will
you be ready?
Retirement is about new
possibilities, new opportunities,
new experiences with a sense
of personal freedom and
potential spend it well!
2000
2002 Americans age 65 and
older spent an average of $3,586
on healthcare, representing about
12% of their total out-of-pocket
expenses, according to the U.S.
Bureau of Labor Statistics. That
share is expected only to increase
as healthcare costs rise faster
than benefits.
Source: U.S. Dept. of Labor Stat istics, 4/05.
2007 Sir Paul McCartney
turns 65.
1940
1941 Workers reaching the
age of 65 begin to receive a
guaranteed federal pension.To pay for Social Security, the
United States would build up a
reserve fund financed by new
payroll taxes on employers and
workers a combined 2% in
1937, rising to 6% in 1949.
Source: Soc. Sec. Admin., 4/05.
1946 First Baby Boomers born.
Source: U.S. Census Bureau, 4/05.
1950
1950 Sixteen workers paying
into Social Security for every
one retiree drawing benefits.With technological innovations
such advancements in room
and central air conditioning,
development of Sun Belt cities
such as Houston, Atlanta, Miami,
and Phoenix in the southern and
southwestern states was spurred,
leading to the snowbird.
Source: Soc. Sec. Admin., 4/05; Demographic Trendof the 20th Century, U.S. Census Bureau, 4/05.
1957 While Baby Boom peakswith 4.3 million babies born,
highest ever, diaper industry
revenues soar more than 50%.
Source: U.S. News and World Report, 3/86.
1990
1990 Oldies radio stations
start playing Beatles, Supremes,
and Beach Boys songs.
1998 33% of labor force is
age 45 and older.
Source: U.S. Census Bureau, 4/05.
1999 3.3 workers pay into the
Social Security system for every
person drawing benefits. The Dow
Jones Industrial Average, which
had stood at just 1,000 in the
late 1970s, hit the 11,000 mark
in 1999, adding substantially to
the wealth of many though not
all Americans, allowing many to
consider a retirement earlier than
they may have planned.
Source: Lipper Inc., 4/05; Soc. Sec. Admin., 4/05.
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2010
2011 First baby boomers will
turn 65, and the connection
between age and retirement
may continue to erode.
Source: U.S. Census Bureau, 4/05.
1960
1961 The age at which men are
first eligible for old-age insurance
was lowered to 62, with reducedbenefits (women previously were
given this option in 1956), ultimately
leading to a lowering of the average
retirement age. The number of
people receiving disability benefits
more than doubled from 1961
to 1969, increasing from 742,000
to 1.7 million.
Source: Soc. Sec. Admin., 4/05.
1965 Health coverage is extended
to almost all Americans aged 65 or
older. Nearly 20 million beneficiaries
enrolled in Medicare in the first
three years of the program.
Source: History of Medicare, Soc. Sec. Admin., 4/05.
1968 VW sells 423,000 Beetles in
the U.S.
1970
1970 University enrollment up
400% since 1945 thanks to Baby
Boomers and the GI Bill.Source: National Center for Educational Studies,4/05.
1977 It became apparent that
Social Security faced a funding
shortfall, both in the short-term
and in the long-term. The short-
term problem was caused by the
bad economy, and the long-term
problem by the demographics
associated with the baby boom.
In a 1975 report trustees said theTrust Funds would be exhausted
by 1979. This financing shortfall
was addressed by the 1977 Social
Security Amendments.
Source: Soc. Sec. Admin., 4/05.
1980
1982 Last of the Boomers
complete high school; graduation
rate of 88.8% highest to date ofany generation.
Source: National Center for Education Statistics, 4/
1985 Workforce participation
increases slightly for older Americ
men, and dramatically for older
women, and the average age of
retirement begins to rise.
Source: Harvard School of Public Health, 4/05.
1987 Dow drops 22% in Octobe
Source: Lipper Inc., 4/05.
The new retirement isnt
about rest, but about finding new
paths for yourself and others.
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From counter culture to
counter retirement
The old notions of retirement have largely been thrown out as an
increasing number of retirees enjoy a more active life than ever before.
While people are certainly approaching retirement differently, several of
the fundamentals of retirement have changed too life expectancies are
significantly higher than for previous generations, the overall health of
retirees is better than ever, and Social Security cannot be depended upon
as a primary source of future income.
2
What are your chances at age 65 of your retirement
lasting longer than 25 years?
You have an almost 40% chance of reaching 90, and eitheryou or your spouse has a better than 60% chance. Have you
planned for 25 years or longer in retirement?
Data source: 2000 Annuity Tables, 4/05.
0%
20%
40%
At least one spouse
60%
80%
100%
Age80 85 90 95 100 105
Individual
Why only vacation at your
favorite spot? Retirement allows
you to build a new life there.
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Is there a second career youd like to
pursue? An idea you never had time
to follow up?
Do you want to devote yourself to
a hobby, such as finally writing your
first book?
Have you decided to go back to school
to master a new subject?
Are you planning to volunteer for a
cause you believe in, such as working
with children, a foundation, or a
nonprofit group?
What about travel? Where do you
want to go? For how long?
Getting what you want and getting what you need
Greater longevity and assets, combined with your own creativity, have opened the doors
of a new perception about what retirement can truly be. The ability to be independent,
to be in control of your schedule and plans, also requires the ability to control your
assets so that you can help create the level of income that you need with the level of
risk you feel is appropriate. You also need the freedom to pursue your retirement goals,
requiring greater flexibility than previous retirees in structuring your investment portfolio.
The opportunity to get back to your dreams or create new ones
Potential plans are as individual as each future retiree. What do you have planned?
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Challenge: Changing sources of income
Retirement challenges
are a-changin, too
Greater freedom in retirement requires greater stability of income, and
the control and flexibility to adjust to your evolving needs. The changes
in retirement have intensified the challenges future retirees will face,
demanding a financial and retirement plan that accounts for them. What
are the five most pressing challenges for the Retirement Revolution?
The pensions of past generations are
gone, Social Security will be diminished.
Also, current retirees are finding their
retirement spending is declining less
than they expected, limiting the
opportunities open to them. That
means your personal plan must assume
greater responsibility for your retirement
income, and new sources of income for
retirement planning must evolve.
Furthermore, you need to use those
assets in the most efficient manner
possible, while considering additional
factors, such as taxes, accessibility,
and portfolio allocation.
Ultimately, you have to find other
sources of income that give you the
flexibility you need to pursue your
retirement your way.
1
Where will all your income come from?
With 58% of current retirees income
based on pensions and Social Security,
future retirees must reconsider how they
may need to make up any potential gap.
Data source: Social Security Fast Facts, 2004, Social SecurityAdministration, 4/05.
4
Pursuing your passions full-time may
take you to places that would surprise
not only previous generations of
retirees but also yourself.
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Challenge: Your income must last your lifetime
2Compared to previous generations, you
can expect to live a longer, healthier life
in retirement. This great benefit also
means that you could potentially outlive
your income. A longer retirement
magnifies the impact on your savings
at even low withdrawal rates.
The table below shows your chances
of your retirement savings lasting
through a 25 year retirement. The
table takes into account the effect of
inflation by increasing the withdrawal
rate by inflations rate to create a truly
stable income.
Chances of your income lasting throughout a 25-year retirement
Simulation estimates the range of possible outcomes by using the historical 19262004 annual average return and standard deviationfigures for the asset classes and inflation. These figures assume that a person retires at year zero and withdraws a required income needeach year beginning in year one, the initial annual withdrawal is adjusted by the historical 19262004 inflation rate of 3.1% each year,and the reinvestment of income and does not account for taxes or transaction costs.
Indices used: Stocks, S&P 500 Index; Bonds, 5-year U.S. Government Bond Index. Government bonds are guaranteed by the full faith andcredit of the United States government as to the timely payment of principal and interest if held to maturity, while returns and principalinvested in stocks are not guaranteed. The above indices are unmanaged and unavailable for direct investment. Index past performancecannot guarantee future returns.
These projections do not take into account other variables such as fluctuating principal and changing tax consequences. No assurance canbe given that the assumptions will prove to be correct, and the difference between assumptions and actual results could vary materially.
5
With a 100% stock portfolio, you only have a 49% chance of your incomelasting, but also have considerably higher risk. More importantly, in almost
every instance, simply investing in stocks and bonds still falls short more
complex strategies or products may be necessary to maintain your income goals.
Data source: Ibbotson Associates, 4/05.
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Challenge: Maintaining your standard of living
3Inflation constantly erodes what your
current savings can buy through increased
costs and diminished purchasing power,
while taxes reduce your savings returns.
Additionally, taking a flat 5% annual
income from your investment portfolio
can create problems over the years,
as the buying power of that amount
is reduced by inflation. And if that
portfolio is only returning 5% after
taxes as well, then your investment
base ultimately wont be able to keep
up with inflation either.
Your retirement plans must now include
ways for your income and portfolio to
keep pace with inflation and the impact
of taxes.
Cost of inflation
Data source: U.S. Bureau of Labor Statistics, 3/05.
Expense Time periodAvg. annualinflation rate
$1 Equals(2003)
Hotel stay 19662004 6.22% $0.09
Dining out 19522004 4.28% $0.11
Admissions to movies,theater, concerts, andsporting events
19772004 5.05% $0.26
Sunday drives can extend into Monday,
Tuesday, or even another continent.
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Challenge: Market volatility
4Investing in the equity markets can
potentially help you outpace inflation
and help make your savings last for your
lifetime; however, it creates another
significant challenge market volatility.
Your income strategy must account
for how much of your portfolio is
in the market and which tactics you
use to help reduce volatility, creating
implications for which investments and
financial products you should include in
your overall portfolio.
Challenge: Rising healthcare costs
5While healthcare costs are
increasing overall, they have risen
disproportionately higher for retirees.
Further, unexpected emergencies and
the cost of long-term medical care can
easily exhaust your savings faster than
expected or eliminate your ability to
leave a financial legacy.
While Medicare and Medicaid may
help somewhat, maintaining an
independent lifestyle requires a strategy
for addressing day-to-day healthcare,
medical emergencies, and the possibility
of long-term care.
Rising costs for retirees
medical coverage
90% of employers are likely to
increase retiree contributions to
healthcare premiums1
20% of employers are likely to terminate
retired employee health benefits1
The numbers of employers offering
retiree health benefits has declined42% from 1988 to 2003
1
Annual medical spending for
consumers age 65+ rose 22.3%
over consumers age 45552
Annual medical spending for
consumers age 75+ rose 26.1%
over consumers age 45552
Positive and negative years of the
S&P 500 Index (19262004)
-40
-20
0
20
40
60
80
Positive
70.9%
Negative
29.1%
From 19262004, the market was down
29% of those years an important fact
to consider when planning.
7
1The State of Retiree Health Benefits, Henry J. Kaiser Family
Foundation, 2004.2Consumer expenditure survey 2003, U.S. Bureau of Labor
Statistics, 2004.
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A time to sow, a time to reap
Revolutionizing your future. Your retirement is an opportunity to enter a new
phase of your life where you can pursue your dreams as never before. However,
planning has to begin now in order to provide time to determine your financial goals
as well as decide how you really want to spend your time. The following principles of
income management provide guidelines for you to adjust to your individual situation.
8
Revolutionary income management
This pie chart represents the different uses of your assets during retirement. How much of
your portfolio is allocated to each area will be based on your individual needs and goals.
Variable expenses usually include travel,
leisure activities, gifts, etc.
Fixed expenses include mortgage/rent,
utilities, monthly healthcare and prescription
costs, and recurring bills
Wealth transfer is assets designatedfor your family or a foundation
Healthcare assets cover any expenses
beyond routine prescription and doctors bills,
such as an emergency and long-term care
Emergency/opportunity funds are
immediate cash for emergencies you may face
or financial opportunities you want to explore
Income management
A shifting income portfolio for evolving retirement needsPrevious generations of retirees could shift their entire portfolio to income. However,
a 30-year retirement requires you to regularly reevaluate the balance between growth
potential, protection, and actual income, to help your assets outlast you.
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Enjoying yourself is part of retirement,
but the question becomes whether its in
the Rockies or Alps.
9
Income strategic allocation
Building your income portfolio is the process of selecting the products that will both cover your needs
and also work well together. Five overall strategies exist for filling out your income portfolio, with
products generally falling into one of the following categories based on their primary characteristics.
Growth: Provide historically greater
returns, though usually with higher risk, such
as equities. Ultimately, these investments help
you maintain accumulation potential within
your portfolio so that your assets can both
potentially outpace inflation and last longer
than you do. Their more variable nature may
make them better suited to variable expenses
rather than depending on them for your current
fixed expenses. However, their greater growth
potential makes them essential for maintaining
the buying power of your income for your fixed
expenses in the future. Some may have tax
advantages.
Fixed: These types of investments
and products provide fixed, stable returns
overall bonds for example. Although they can
be subject to some risks, they can also include
Social Security and pension payments. Overall,
these products and sources are good for fixed
expenses. They also may be appropriate tools
for more conservative investors seeking wealth
transfer. Some may have tax advantages.
Insured1: While these types
of products may have a growth or fixed
orientation, the primary characteristic is an
insurance component that provides some
form of insurance protection. They generally
cost more because of it and usually have tax
advantages. They include a variety of financial
products including annuities, life insurance,
and long-term care insurance2 each of which
has its own uses in income management.
Liquid: These products provide easy
and quick access to your assets and generally
have lower risk and returns, such as certificates
of deposits, treasury bills, and money markets
funds. They are traditionally used for emergency
funding, whether financial or medical.
Miscellaneous: The products in
this group vary widely and can provided income,
growth potential, or wealth transfer potential.
They not only include real estate, but also
products and strategies, such as IRAs, 401(k)s,
and trusts, which will contain assets similar to
those in the other four categories.
1Any benefits are backed by the claims-paying ability of and are subject
to the financial condition of the insurer.2Lincoln does not offer long-term care insurance.
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Finding potential solutions
For each of the five retirement challenges discussed Changing sources
of income, Your income must last your lifetime, Maintaining
your standard of living, Market volatility, and Rising healthcare
costs several solutions generally exist, allowing you to choose one
based on your individual goals and profile. In addition to ensuring that
these products and strategies are suitable, you should consider how they
work together to provide the best possible mix for your overall portfolio.
Changing sources of income: A well-
diversified portfolio provides flexibility
in how you can take your income. Also,
guaranteed sources of income can help
provide steady income so you are not
as dependent on Social Security.
Income longevity: Ensure that you
cannot outlive your income by using
insuring income streams, potentially
from annuities. The income these types
of insured products provide can become
your stable income, along with any
pensions and interest from bonds, for
your fixed expenses.
Using investments with higher historical
returns, such as equities, can provide
longevity to your overall portfolio.
When used as income, they may be
more appropriate for your more variable
expenses, due to their inherently
variable nature.
Maintaining your lifestyle: Use
equity-oriented investments, as well
as inflation-adjusted bonds and mutual
funds, in suitable proportion to your
overall portfolio, to help keep pace
with inflation and to help maintain
your standard of living.
Manage your taxes by planning the
order you spend down the different
types of assets in your retirement
portfolio. Consider using tax-
advantaged investments and financial
products, such as tax-exempt mutual
funds and life insurance. Also, shifting
401(k) and similar tax-deferred assets to
an IRA will maintain their tax-deferred
status while potentially providingadditional control and flexibility.
1
2
3
10
Any benefits are backed by the claims-paying ability of
and are subject to the financial condition of the insurer.
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Managing market volatility: You
can receive a steadier income by
guaranteeing a portion of your portfolio
using annuities. Also, designing a more
conservative portfolio in line with your
risk tolerances can help reduce volatility.
Containing medical costs: Using
products, such as long-term care
insurance, can help provide you
comfort and independence by helping
ensure resources for medical care
without allocating a significant
amount of your assets.
4 5
The retirement revolution offers you the opportunity to
pursue life, not watch it the rocking chair will always
be there, for only but a brief rest, later.
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Get together with
your advisor
In light of the complexity of retirements challenges and potential
solutions, crafting an overall financial and income strategy may seem
overwhelming. However, your financial advisor has tools and resources
that can help make this process easier and more effective. Additionally,
your advisors understanding of the different types of investments and
financial products can provide possibilities with which you may not be
otherwise familiar.
Types of investment and financial products
Life Insurance
Long-term
Care Insurance
Annuities
Mutual Funds
Individual Stocks
Individual Bonds
Qualified Plans
(401(k), 403(b), etc)
During your retirement, why simply
attend ballets when you can train future
ballet stars? The retirement revolution
is an opportunity to share all of your
wisdom and skills in creating a legacythat isnt merely financial.
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Volunteer for the revolution
Planning for retirement is the first step in a transition that ultimately
will allow you to return to the more carefree days so you can develop
your passions again. Interests that you previously had to enjoy off the
clock will become the clock. And as the basic factors of retirement and
its challenges have changed significantly over the decades, retirementplanning needs to evolve, also. Stronger financial planning can help make
being 65 a time of anticipation, one that looks toward your personal
revolution of retirement.
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Important disclosures. Please read.
Any tax information contained in this brochure is not intended or written to be used, and it may not be used
by any taxpayer, for the purpose of avoiding penalties under the Internal Revenue Code that may be imposedon the taxpayer. This brochure was created to support the promotion or marketing of the transaction(s) or
matter(s) addressed in the brochure. A taxpayer should be advised to seek advise based on the taxpayers
particular circumstances from an independent tax advisor.
Neither Lincoln nor its representatives provide tax or legal advice. You should contact your tax advisor orattorney regarding your particular situation.
You should consider the investment objectives, risks, charges and expense of any investment carefully before
investing. The prospectus contains this and other important information about the investment. Please requesta prospectus from your advisor.
2005 Lincoln Financial Distributors
All rights reserved.
www.LFG.com
Lincoln Financial Group is the marketingname for Lincoln National Corporation
and its affiliates.
LFD0504-0574 W65-0040-05W65-CORE RP 8/05
A century of experienceAt Lincoln Financial Group, we have a 100 year-old heritage of
helping people find solutions to their financial challenges with
the same honesty, integrity, and responsibility that youd expect
from our namesake. Its a legacy that we proudly and respectfully
continue each day.
The strength of Lincoln today
Today, Lincoln Financial is one of the largest financial services
companies in the country. We continue a commitment to strength
and stability to provide our investors with the confidence that we
believe is indispensable to who we are. We are a proven industry
leader in identifying and delivering sophisticated financial planning
and product solutions for the creation, protection, and enjoyment
of wealth.
Helping investors redefine retirement, their way
Lincoln Financial focuses on meeting the needs of investors as they
face both greater freedom in how they retire and greater challenges.
We offer a complete suite of financial products and investments to
help investors find solutions for reaching their goals.
At Lincoln Financial, we dont believe retirement is the end.
On the contrary, it might just be the start of what you were meant
for all along.
Nota deposit
Not
FDIC-insured
Not insured by any federalgovernment agency
Not guaranteed by any bank
or savings association