volatility vs annuity in retirement

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.