volatility vs annuity in retirement
TRANSCRIPT
Guaranteed Retirement IncomeStrategies For Those In or About To Enter Retirement
Help Me Finish This Sentence
“The greater the risk, the greater the .”
Is that really true?
Reward
Source: http://www.merriam-webster.com/dictionary/risk
Risk – (Definition)
Risk:noun \ˈrisk\
The possibility of loss or injury
The chance that an investment (as a stock or commodity) will lose value
Let’s Try This Again.
The greater the risk, the greater the…
Chance for Loss!
Identify Common Problems Discover Uncommon Solutions
Common:
Many people research markets, read publications, and speak to advisors in search of opportunities.
Uncommon:
Fewer people dedicate time clearly identifying potential harm to their assets.
Fundamental Decisions for Retirement Success
1st
First, identify harmful risks.
Second, seek reasonable opportunities.
2nd
Markets rise and fall on a daily basis. Accessing your money at the wrong moment can dramatically affect how long your retirement dollars may last.
Volatility
Volatility
Riding the financial roller coaster can make it difficult to hit a bull’s eye on your personal retirement goals.
Common Suggestions?
How do we reduce the impact of volatility?
Diversify!
Common Suggestions?
How do we reduce the impact of volatility?
Common diversification may not the answer.
You might need uncommon diversification.
Source: https://www.google.com/finance
Compound Annual Growth Rate? 2.68%
“Is the 4% Rule Still Appropriate?”
“The 4 percent rule no longer applies for most retirees.”
Sources: http://www.cnbc.com/id/102605878 & http://www.schwab.com/public/schwab/nn/articles/Is-the-4-Percent-Rule-Still-Appropriate
Monthly Income Assets Needed
$500 $150,000$1,000 $300,000$2,000 $600,000$3,000 $900,000$4,000 $1,200,000$5,000 $1,500,000$6,000 $1,800,000
The 4% Rule?
“The 4 percent rule is Not Safe...”
Why?
Sources: http://www.cnbc.com/id/102605878 & http://www.schwab.com/public/schwab/nn/articles/Is-the-4-Percent-Rule-Still-Appropriate
VOLATILITY!
“The 4 percent rule no longer applies for most retirees.”
“The 4 percent rule is Not Safe...”
Sources: http://www.cnbc.com/id/102605878 & http://www.schwab.com/public/schwab/nn/articles/Is-the-4-Percent-Rule-Still-Appropriate
“The 4 percent rule no longer applies for most retirees.”
It’s not that the stock market never goes up – It does go up. The problem is this – Sometimes it goes down.
It would take far less money to generate the same income.
What if there were a 6% rule?
Monthly Income Assets Needed4% Rule
Assets Needed6% Rule
$500 $150,000 $100,000$1,000 $300,000 $200,000$2,000 $600,000 $400,000$3,000 $900,000 $600,000$4,000 $1,200,000 $800,000$5,000 $1,500,000 $1,000,000$6,000 $1,800,000 $1,200,000
Difference:$50,000$100,000$200,000$300,000$400,000$500,000$600,000
Commonly Available Guaranteed Lifetime Income Rates
60 year old = 5.00%65 year old = 5.50%70 year old = 6.00%75 year old = 6.50%
Source: NWL Income Outlook Form DM-1058.Rev10.11
Example From An Actual Company
Source: https://www.google.com/finance
Compound Annual Growth Rate? 2.68%
Remember This?
Source: https://www.google.com/finance
Remember This?
Beginning with $100,000
Withdraw $500 Per Month (6.0%)
Total Withdrawals:
$87,000
Beginning with $100,000
Withdraw $500 Per Month (6.0%)
Source: https://www.google.com/finance
By June 2, 2014, you have run out of money.No money left to participate when the market rebounds.
Source: https://www.google.com/finance
By June 2, 2014, you have run out of money.No money left to participate when the market rebounds.
Things That Outperform This Chart
Coffee CanMattressSafeChecking AccountSavings Money MarketCD
Systemic Risk
“The risk inherent to the entire market or an entire market
segment. Systematic risk, also known as “undiversifiable risk,”
“volatility” or “market risk,” affects the overall market, not just a particular stock or industry.”
Systemic Risk
“This type of risk is both unpredictable and
impossible to completely avoid. It cannot be mitigated
through diversification…”
Systemic Risk
Systemic Risk is responsible for a
significant portion of price changes you see
in a stock market.
Systemic Risk
So how does one avoid Systemic Risk?
LEAVE the SYSTEM!
One Solution…
A Fixed Indexed Annuity (FIA) gives you the potential to exceed traditional fixed
interest rates by linking your interest credits to the
performance of an external market index.
Fixed Indexed Annuity
If the market index rises… Your money grows… Tax-deferred!
START POINT
Annuity Account ValueLeading Market Index
Fixed Indexed Annuity
If the market index falls… Your money protected…
Annuity Account ValueLeading Market Index
START POINT
Fixed Indexed Annuity
As the market index recovers… Your money grows…
Annuity Account ValueLeading Market Index
START POINT
Fixed Indexed Annuity
So what happens next year?Your values will either increase or stay the same?…
Annuity Account ValueLeading Market Index
START POINT
Your principal and past interest credits are always protected.
