Post on 26-Mar-2015
USA-1274a (R-8/2007) For Broker/Dealer use only – Not for use with the public.
Retirement readiness with the 3-7-5 strategy
Re-Engineering RetirementSM
Insurance and annuities are issued by Allianz Life Insurance Company of North America
Neither Allianz, its agents, or representatives offer tax or legal advice. Clients should always consultwith qualified tax/legal advisors concerning their own situation.
© Copyright 2008 Allianz. All rights reserved.
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USA-1274a (R-8/2007) For Broker/Dealer use only – Not for use with the public.
Transition from accumulation to income
Types of retirementexpenses
Sources ofincome
Options for makingincome cover expenses
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ENT-657 (R-12/2008)
Important retirement questions
Will I have enough to retire when I want to retire?
Will I run out of income in retirement?
How will inflation affect my retirement income?
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ENT-657 (R-12/2008)
Retirement readiness?
- Don’t have formal retirement strategies
- Assume they have limited options for improving their financial situation once they reach retirement
- Confused about the complexity of financial issues
- Limited knowledge of and/or help in the retirement income strategies process
- Think retirement is simply the reverse of accumulation
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The retirement income strategy
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Agenda: Re-Engineering Retirement
The 3-7-5 retirement strategy / Case study
Next steps
Difference between accumulation and income
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ENT-657 (R-12/2008)
Retirement accumulation stage
Retirement Accumulation
Stage
Retirement Income Stage
Financial Objective
Have enough money to retire
Asset Allocation Portfolio allocation
Time Horizon
Known to retirement
Thinking differently
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ENT-657 (R-12/2008)
How much will we have?
How much money will we need?
Will we have enough to get by?
Will there be enough for extras?
Will there be something for our heirs?
Thinking differently
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ENT-657 (R-12/2008)
Retirement income stage
Retirement Accumulation
Stage
Retirement Income Stage
Financial Objective
Have enough money to retire Not outlive assets
Asset Allocation Portfolio allocation Withdrawal
allocation
Time Horizon
Known to retirement
Thinking differently
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ENT-657 (R-12/2008)
The “Lost Decade”
6,000
8,000
10,000
$12,000
The S&P 500: 1999 through February 2008. Total return on $10,000 investment adjusted for inflation. Note: Not possible to invest directly in the index.
Standard & Poor’s 500® index (S&P 500®) is comprised of 500 stocks representing major U.S. industrial sectors. “Standard & Poor’s®,” “S&P®,” “S&P 500,” “Standard & Poor’s 500,” and “500” are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Allianz Life Insurance Company of North America. The product is not sponsored, endorsed, sold or promoted by Standard & Poor’s and Standard & Poor’s makes no representation regarding the advisability of purchasing the product.
Thinking differently
The Wall Street Journal, March 26, 2008
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ENT-657 (R-12/2008)
250000
750000
1250000
1 3 5 7 9
11
13
15
17
19
21
23
25
27
29
Sequence of returns
Bad returns later / sooner
Year
$500,000
$3,000,000
0 5 10 15 20 25 30
Hypothetical value
Hypothetical value at 0%
Year 1: -17.9%
Year 2: - 0.8%
Year 3: -19.7%
Year 4: 3.7%
Year 5: 11.0%
Year 26: 22.2%
Year 27: 5.2%
Year 28: 14.3%
Year 29: 24.6%
Year 30: 12.1%
Year 1: 12.1%
Year 2: 24.6%
Year 3: 14.3%
Year 4: 5.2%
Year 5: 22.2%
Year 26: 11.0%
Year 27: 3.7%
Year 28: - 19.7%
Year 29: - 0.8%
Year 30: - 17.9%
This example is shown for illustrative purposes only and is not intended to predict or project future results. It is not intendedto represent any specific product or investment, and does not reflect the deduction of taxes or product fees or expenses.
Thinking differently
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ENT-657 (R-12/2008)
Retirement income stage
Retirement Accumulation
Stage
Retirement Income Stage
Financial Objective
Have enough money to retire Not outlive assets
Asset Allocation Portfolio allocation Withdrawal
allocation
Time Horizon
Known to retirement
Unknown to date of death
Thinking differently
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ENT-657 (R-12/2008)
How can we make the most of my retirement income sources?
What should we reposition in consideration of tax and transfer issues?
What should we spend first, next, last?
What should we hold?
Thinking differently
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ENT-657 (R-12/2008)
Transition to:
Maximize sources of income
Retirement income strategies
Retirement Accumulation
Stage
Financial Objective
Have enough money to retire
Asset Allocation Portfolio allocation
Time Horizon
Known to retirement
Thinking differently
Reposition assets to meet needs
and goals
Retirement strategies transition
Re-EngineeringRetirement
Retirement Income Stage
Not outlive assets
Withdrawalallocation
Unknown to dateof death
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The 3-7-5 Strategy
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3-7-5 Strategy
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Three levels of retirement expenses
Expenses
Legacy
Desired
Survival
3-7-5 Strategy
Expenses to cover your most basic needs
Lifestyle “extras”
Funds remaining for your heirs
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ENT-657 (R-12/2008)
Seven sources of income for retirement
Sources of Income
Welfare - charity
Nonqualified Assets (NQA)
Roth IRA
Traditional IRA
Qualified ERISA
Social Security
Continued Employment
Expenses
Legacy
Desired
Survival
3-7-5 Strategy
The base
Employer sponsored plans
ERISA contributions and rollovers
Tax deferred / tax free
Mutual funds, CDs, stocks, bonds
Phase into retirement gradually
Not desirable
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ENT-657 (R-12/2008)
Hypothetical story
Ken and Patty at retirement
3-7-5 Story
Note: This example is shown for illustrative purposes only and does not represent actual Allianz clients..
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Ken & Patty – age 66
Note: This example is shown for illustrative purposes only. All figures are pre-tax estimates.
3-7-5 Story
Combined Social Security $2,000 per month
Defined Benefit (Pension) income $500 per month
Home is mortgage free Zero
IRA (including rollover) $500,000
Savings portfolio $400,000
Estimated annual retirement expenses
Survival expenses: $36,000 Desired expenses: $20,000
Desire to leave a legacy
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ENT-657 (R-12/2008)
Survival
$36,000
Desired
$20,000
Legacy
ExpensesRe-Engineering RetirementSources of Income
Welfare – charity
Nonqualified Assets (NQA)
Roth IRA
Traditional IRA
QualifiedERISA
Social Security
Continued Employment
$400,000
None
$500,000
$24,000
$6,000
3-7-5 Story
Ken & Patty
Note: This example is shown for illustrative purposes only. All figures are pre-tax estimates.
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Re-Engineering Retirement
Survival
$36,000
Desired
$20,000
Legacy
ExpensesSources of Income
Welfare – charity
NQA
Roth IRA
Traditional IRA
QualifiedERISA
Social Security
Continued Employment
$6,000
$120,000 annuity
$280,000 (25 years @ 5% return)
$24,000
None
$500,000
Patty’s pension plan$6,000
5% Rate of return is for illustrative purposes only. Guarantees are backed by the financial strength and claims paying ability of the issuing company.
3-7-5 Story
Ken & Patty
$24,000
$6,000
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ENT-657 (R-12/2008)
Re-Engineering Retirement
Survival
$36,000
Desired
$20,000
Legacy
ExpensesSources of Income
Welfare – charity
NQA
Roth IRA
Traditional IRA
QualifiedERISA
Social Security
Continued Employment
$6,000
$120,000 annuity
$6,000
$24,000
Work part-time until age 70
$24,000
$280,000 (25 years @ 5% return)
None
$500,000
Patty’s pension plan$6,000
3-7-5 Story
Ken & Patty
Note: This example is shown for illustrative purposes only. All figures are pre-tax estimates.
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ENT-657 (R-12/2008)
Re-Engineering Retirement
Survival
$36,000
Desired
$20,000
Legacy
ExpensesSources of Income
Welfare – charity
NQA
Roth IRA From IRA
Traditional IRA IRA $500,000
QualifiedERISA
Social Security
Continued Employment
$6,000
$120,000 annuity
$6,000
$24,000
IRA RMD $18,250 From nonqualified $1,750
Roth IRA
$24,000
$280,000 (25 years @ 5% return)
Work part-time until age 70
Patty’s pension plan$6,000
3-7-5 Story
Ken & Patty
Note: This example is shown for illustrative purposes only. All figures are pre-tax estimates.
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But what if …?
3-7-5 Strategy
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ENT-657 (R-12/2008)
5 Options to improve income
Sources of Income
Welfare – charity
Nonqualified Assets
Roth IRA
Traditional IRA
Company retirement programs
Social Security
Continued Employment
3-7-5 Strategy
Survival
Desired
Legacy
ExpensesOptions
Lower your expectations
Spend less and save more now
Decide to work longer.
Take on more investment risk
Combination (or all) of above
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5 Options at work
3-7-5 Strategy
$ n
eed
ed t
o s
up
ple
men
t in
com
e
$ now (401(k))
$ additional (401(k)) $ more
70?
Conservative 4 - 6%
Moderate 6 - 8%
Aggressive 8 - 10%
Combination of all options
Current standardof living
Age
Time45 65
Retirement
This example is shown for illustrative purposes only and is not intended to predict or project future results. Your actual results will vary. Please note that with the potential for greater returns comes greater risk and volatility.
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ENT-657 (R-12/2008)
Current standardof living5 Options at work
3-7-5 Strategy
Age
Time
$ n
eed
ed t
o s
up
ple
men
t in
com
e
$ additional (401(k)) $ more
Combination of all options
65 68?
Conservative 4 - 6%
Moderate 6 - 8%
Age
Time45 65
This example is shown for illustrative purposes only and is not intended to predict or project future results. Your actual results will vary. Please note that with the potential for greater returns comes greater risk and volatility.
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ENT-657 (R-12/2008)
Summary
Evaluate how well your retirement expenses match up with your retirement income
Many people approaching retirement are worried about their financial security in retirement
Re-Engineering Retirement can help you successfully transition from accumulation to income
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ENT-657 (R-12/2008)
What is the next step?
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ENT-657 (R-12/2008)
Lets meet for an analysis and recommendations
- Analysis and anticipated retirement expenses compared to anticipated retirement income
- Recommendations for positioning resources to help enhance income
- Options (if needed) designed to compensate for an anticipated shortfall of income
Next steps
Next steps?
This analysis is not a comprehensive financial or retirement plan. Planning services are available at additional cost and offered only by appropriately licensed registered investment advisors.
USA-1274a (R-8/2007) For Broker/Dealer use only – Not for use with the public.
Thank you!
© Copyright 2008 Allianz. All rights reserved.
Not FDIC insured May lose value No bank or credit guarantee Not a deposit Not insured by any federal government agency or NCUA/NCUSIF