Retirement Challenges Know the possible road blocks in your retirement

PAC.5311 (03.15)

RETIREMENT CHALLENGES

2

What if my spouse passes away?

Will I have enough?

What about my health care costs?

Will I be able to keep up?

What if the market doesn’t cooperate?

Will my savings last long enough?

Will there be anything left?

Questions About Retirement 1

2

3

4

5

6

7

3

YOU ARE NOT ALONE 4

68% 75% 78% 79% 84%

You are Not Alone

Outliving your retirement

savings

Paying for long-term care costs

Medicare benefits being

reduced

Social Security benefits being

reduced

Paying for health care

costs

Source: Fidelity Investments® 2013 Retirement Savings Assessment™

Retirement Concerns

5

76%

49%

Pre-retirees Retirees

You are Not Alone Three in four pre-retirees, half of retirees, concerned with long-term financial future

Source: Society of Actuaries The Process of Retirement and Retirement Risks, 2013

28%

48%

12%

37%

Somewhat concerned

Very concerned

6

UNDERSTANDING

RISKS

7

Understanding Risks

Longevity

Inflation

Interest Rate

Market Volatility

Employment

Public Policy

Health Care Needs Long-Term Care

Loss of Spouse

Unexpected Financial Responsibility

Financial Elder Abuse

Retirement Risks

8

Retirement Income, Morningstar, 2013; Retirement Risk Solutions, The American College, 2014

Solvency

Savings

Retiree spending

Withdrawal

Liquidity

Timing Frailty

Understanding Risks Retirement Risks

9

Longevity

Inflation

Interest Rate

Market Volatility

Employment

Public Policy

Health Care Needs Long-Term Care

Loss of Spouse

Unexpected Financial Responsibility

Financial Elder Abuse

Solvency

Savings

Retiree spending

Withdrawal

Liquidity

Timing Frailty

LONGEVITY RISK

10

Longevity Risk

8

10

12

14

16

18

20

1980 1990 1995 2000 2005 2010

Year

s

At Age 65 At Age 75

Source: Health, United States, 2012. U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Health Statistics

Life Expectancy

11

Longevity Risk Retirees Should Plan for a Long Retirement Probability of living to various ages

Source: Annuity 2000 Mortality Tables. © 2013 Morningstar. All Rights Reserved. 3/1/2013

0%

25%

50%

75%

100%

65 70 75 80 85 90 95 100 105

78 81 86

85 88 91

91 93 96

AGE

Male

Female

At least one spouse

12

Longevity Risk Ways to Manage Longevity Risk:

Social Security 1

Traditional Pensions 2

Annuities 3

1. Immediate 2. Indexed 3. Variable 4. Fixed

13

With Guaranteed Minimum

Withdrawal Benefits (GMWB)

HEALTH CARE RISK

14

Health Care Risk

$206,200

$276,300

$372,400

$50,900 $91,200

$146,400

$0$50,000

$100,000$150,000$200,000$250,000$300,000$350,000$400,000

If you live to 75 If you live to 80 If you live to 85

If you retire at 55 If you retire at 65

Medical Costs in Retirement Per Person

Source: Yamamoto, 2013. Health Care Costs from Birth to Death Society of Actuaries

15

Health Care Risk

70% of all people over age 65 will require some type of chronic illness or long-term care during their lifetime

(www.longtermcare.gov; August 2012) (www.ltctree.com; August 2012)

$80,850 The national average cost of care for just one year in a nursing home is about

(www.longtermcare.gov; August 2012)

About 75% of all single people and 50% of all couples spend their entire savings within one year of entering a nursing home.

Source: Barbara Butrica and Mikki Waid, “What are the Retirement Prospects of Middle Class Americans?” AARP Public Policy Institute Report, 2013.

8%

18% Healthcare costs are expected to rise from 8% of income among today’s retirees at age 70 to 18% among future retirees when they are 70.

16

Health Care Risk Ways to Manage Health Care risk

Medicare/Medicaid 1

Employer-sponsored or private health insurance 2

Personal savings 3 1. Long-Term Care

Insurance (LTCi) 2. Health Insurance

Private payment options 4

17

INFLATION RISK

18

Inflation Risk

1998 2013 Increase

Bread $0.87 $1.39 59%

Movie Ticket $4.69 $8.13 73%

Average Price of House Sold $183,300 $321,200 75%

Postage Stamp $0.32 $0.46 43%

Gallon of Milk $2.86 $3.50 22%

Source: U.S. Census Data, USPS, www.natoonline.org, U.S. Bureau of labor statistics,

Comparison of Consumer Prices 1998 vs 2013

19

Inflation Risk Inflation and Taxes Reduce Returns Compound annual returns 1926–2013

Past performance is no guarantee of future results. Assumes reinvestment of income and no transaction costs. Inflation rate over the time period 1926–2013 was 3.0%. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2014 Morningstar. All Rights Reserved.

Cash Bonds Stocks

–2% 0% 2% 4% 6% 8%

12% 10.1%

6.9%

5.0% 5.5%

2.4%

0.4%

3.5%

0.5%

–0.8%

10%

Return After inflation After taxes and inflation

20

Inflation Risk Ways to Manage Inflation Risk:

Inflation-indexed Treasury bonds 1

Investment in natural resources and commodities 2

Social Security benefits 3

Common Stocks 4

Annuities 5

Immediate Annuities Indexed Annuities

21

INTEREST RATE RISK

22

Interest Rate Risk

Past performance is no guarantee of future results. Each bar shows the range of yield for each bond over the time period July 1954 to December 2013. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2014 Morningstar. All Rights Reserved.

History of Interest Rates, July 1954–December 2013

5.16% 6.41%

0%

5%

10%

15%

20%

5.83% 5.23%

1-yr Government Yield

IT Government Yield

LT Government Yield

Federal Funds

Average Current

23

Interest Rate Risk

Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2014 Morningstar. All Rights Reserved.

History of Interest Rates, January 1926–December 2013

3.5%

-4%

0%

4%

16%

20%

4.6% 5.2%

Long-Term Government Bonds

Intermediate-Term Government Bonds

30-day Treasury Bills

Average Current

12%

8%

0.0% 1.1%

3.7%

24

Interest Rate Risk Ways to Manage Interest Rate Risk:

Stocks, Bonds 1

Annuities 2

25

1. Immediate 2. Indexed 3. Variable 4. Fixed

With Guaranteed Minimum

Withdrawal Benefits (GMWB)

MARKET VOLATILITY RISK

26

Market Volatility Risk

–83.4%

–21.8%

–10.2%

–15.0%

–22.3%

–15.6%

–29.3%

–42.6%

–14.3%

–16.5%

–29.6%

–14.7%

–15.4%

–44.7%

% Loss

–50.9%

34 months 6 months 7 months 5 months 6 months 8 months 19 months 21 months 14 months 20 months 3 months 5 months 2 months 25 months

Downturn

16 months

51 months 35 months

5 months 7 months 0 months 6 months 9 months

21 months 5 months 3 months 8 months 4 months

49 months 37 months

3 months

Recovery

Mar 2009–Mar 2012 Nov 2007–Feb 2009

Sep 1929–Jun 1932 Jul 1932–Jan 1945

Jun 1946–Nov 1946 Dec 1946–Oct 1949

Aug 1956–Feb 1957 Mar 1957–Jul 1957

Aug 1957–Dec 1957 Jan 1958–Jul 1958

Jan 1962–Jun 1962 Jul 1962–Apr 1963

Feb 1966–Sep 1966 Oct 1966–Mar 1967

Dec 1968–Jun 1970 Jul 1970–Mar 1971

Jan 1973–Sep 1974 Oct 1974–Jun 1976

Jan 1977–Feb 1978 Mar 1978–Jul 1978

Dec 1980–Jul 1982 Aug 1982–Oct 1982

Sep 1987–Nov 1987 Dec 1987–May 1989

Jun 1990–Oct 1990 Nov 1990–Feb 1991

Jul 1998–Aug 1998 Sep 1998–Nov 1998

Sep 2000–Sep 2002 Oct 2002–Oct 2006

Past performance is no guarantee of future results. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. Downturns are defined by a time period when the stock market value declined by 10% or more from its peak. © 2014 Morningstar. All Rights Reserved.

Market Downturns and Recoveries, 1926–2013

27

Market Volatility Risk Market Performance Affects Chance of Portfolio Shortfall Six percent inflation-adjusted withdrawal at three confidence levels

IMPORTANT: Projections generated by Morningstar regarding the likelihood of various investment outcomes using the Ibbotson Wealth Forecasting Engine are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results. Results may vary over time and with each simulation. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index. © 2014 Morningstar. All Rights Reserved.

$1M $500K

$100 $50

$10 65 100 95 90 85 80 75 70

Age

90% confidence level 75% confidence level 50% confidence level

28

Market Volatility Risks Ways to Manage Volatility Risk:

Diversification 1 1. Cash 2. Pensions 3. Social Security 4. Stocks 5. Bonds 6. Annuities

• Indexed Annuities • Immediate Annuities • Variable Annuities

29

Retirement Challenges

Protect your retirement income

Understand your risks

Define your budget Create a portfolio to meet your specific

retirement income needs

30

Questions?

Important Information This presentation is intended to provide a general overview of retirement risks. The annuity products mentioned in this

presentation are general overviews of the products. Every company’s products are different and many products offer various

features and options. It’s important to talk with your financial professional to help find the type of annuity product with

features and options that best suit your specific needs and requirements.

This material contains statements regarding the tax treatment of certain financial assets and transactions. These statements

represent only our current understanding of the law in general and are not to be considered legal or tax advice by

purchasers. Neither Protective Life nor its representatives offer legal or tax advice. Purchasers should consult with their

legal or tax advisor regarding their individual situations before making any tax-related decisions.

Protective and Protective Life refer to Protective Life Insurance Company (PLICO) and its affiliates, including Protective Life

& Annuity Insurance Company (PLAICO). Insurance issued by PLICO in all states, except New York, and in New York by

PLAICO. Securities offered by Investment Distributors, Inc. (IDI), principal underwriter for registered products issued by

PLICO and PLAICO, its affiliates. Both companies are located in Birmingham, AL. Product availability and features may vary

by state. Each company is solely responsible for the financial obligations accruing under the policies it issues.

32

33

Variable annuities mentioned on slides 13, 17, 25 and 29 are long-term investments intended for retirement planning and involve market risk and the possible loss of principal. Investments in variable annuities are subject to fees and charges from the insurance company and the investment managers.

All guarantees are subject to claims-paying ability of the issuing life insurance company.

Variable annuities issued by Protective Life Insurance Company (PLICO). Securities offered by Investment Distributors, Inc. (IDI), principal underwriter for registered products issued by PLICO and PLAICO, its affiliates

Investors should carefully consider the investment objectives, risks, charges and expenses of a variable annuity, any protected lifetime income benefit, and the underlying investment options before investing. This information is contained in the prospectus for a variable annuity and its underlying investment options. Prospectuses may be obtained by calling Protective Life at 800.456.6330.

Important Information

34

S&P Information The S&P 500 Index is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by Protective Life. S&P® and S&P 500® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Protective Life. The Protective Indexed Annuity is not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.”