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Volatile markets, falling interest rates and an aging population have significantly changed today’s retirement landscape.

In response, consumers are seeking out financial products that will protect and further grow their retirement savings. According to a recent study, 60 percent of workers report that the total value of their household’s savings and investments, excluding the value of their primary home and any defined benefit plans, is less than $25,000.1 Add to that the decreasing availability of employer sponsored pension plans and the fact that social security was never intended to replace all of your pre-retirement income, and that retirement income gap grows even wider.

Now more than ever, creating a successful retirement plan and being armed with a strategy that considers all factors throughout each phase of the process can help your clients leverage more of their hard-earned dollars and create a “retirement paycheck” they can count on for the rest of their lives. Throughout the accumulation and distribution phases of retirement planning, four common risks come into play. While each of these risks may be independent of each other, the combined effects must also be considered when creating a successful plan for clients. Here we discuss what each risk means and how they may affect each stage of planning.

Products issued by Athene Annuity and Life Company, West Des Moines, IA

Defusing the Top Four Retirement Risks With a Fixed Indexed Annuity

19801 (03/15)

Infl ation Risk

It’s obvious to everyone that things don’t cost what they used to. From everyday products to cars and houses, infl ation drives up the cost of goods and services.

Assuming the same level of infl ation from 1995 to 2015, over the course of a 20-year retirement, your retirement income would need to increase by 50% in order to maintain the same lifestyle. For example, $20.00 in 1995 has the same buying power as $30.00 in 2015.2 Infl ation can be a serious risk — the longer a client is in retirement, the greater the impact of infl ation.

Accumulation Phase – Infl ation is an important consideration when determining the amount of savings your client will need to accumulate in order to reach their retirement goals. Some clients may try to delay retirement and continue to work past their planned retirement date, but research shows that almost 50% of retirees retired sooner than planned due to health problems, disability, company changes, or caring for a family member. 3

Distribution Phase – During retirement, if infl ation has outpaced your clients’ earnings, they may need to fi nd other ways to increase income or be forced to decrease spending, adjusting their standard of living in order to not deplete their assets too quickly.

Market Volatility Risk

Anyone who has had money in the stock market has probably experienced a pretty rocky ride. The S&P 500® has lost roughly half its value twice in the past fi fteen years.4 Despite these drops, the market grew 21% over that same period of time. Boom or bust, no one can predict what the market will do or how the fi nancial landscape will change.

Accumulation Phase – With the markets being so unpredictable, clients may fi nd it hard to determine if their savings will be suffi cient as the value of their assets continually fl uctuate. Clients with their sights set on a fi nancially secure retirement may be ready to limit their exposure to volatile markets, opting for savings vehicles off ering guarantees and protection from market declines in order to meet their goals.

Distribution Phase – Clients are looking for a fi nancially stable retirement. While market volatility swings both ways, most clients will not want to ride this roller coaster with their retirement savings. Taking money needed for retirement expenses from a retirement account when the market is at a low, can impact the ability to recover when the market moves back up.

It’s essential to adapt to the changing landscape and consider risks during each phase of retirement.

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Interest Rate Risk

Low interest rates can reduce retirement income by lowering growth rates for retirement assets. In low interest rate environments, conservative strategies focused on asset protection may not provide adequate investment growth; as a result, assets can be exhausted earlier than expected.

Accumulation Phase – Just like inflation, low interest rates during this phase may require your clients to either postpone retirement and save more now or decrease income later in order to meet their retirement goals.

Distribution Phase – If interest rates are less than your initial target rate of return, clients may need to find additional sources of income, or adjust their standard of living in order not run out of money.

Longevity Risk

People are living longer in retirement today than at any point in history. On average, one out of four 65-year olds today will live past age 90, and one out of 10 will live past age 95.5 Most consumers would agree they would like to maintain their standard of living when they reach retirement and have the confidence that they will not run out of money.

Accumulation Phase – Not knowing how long one might live makes it difficult to determine just how much clients might need to save in order to reach their retirement goals. Many clients underestimate how long they will live, putting strain on personal savings and increasing the likelihood of outliving their assets.

Distribution Phase - Adjusting income withdrawals to a level that will be sufficient enough to last beyond your life expectancy will become a necessary part of planning. Finding a product that guarantees lifetime income may be the answer.

A Viable Solution

In these ever-changing times, creating sustainable retirement income strategies is more important than ever. It’s essential to adapt to the changing landscape and consider these risks during each phase of retirement with your clients in order to ensure their peace of mind and quality golden years. While flexibility and constant re-evaluation is key throughout the retirement planning process, one product you may want to consider during the planning process is a fixed indexed annuity.

Including a portion of a clients’ overall portfolio in a fixed indexed annuity can help mitigate some of the effects of risks that impact a financially secure retirement. Fixed indexed annuities may provide your clients guarantees, the potential for growth with protection from market declines and an optional rider to keep pace with inflation as well as creating a guaranteed lifetime income they will never outlive.

Athene offers a varied portfolio of fixed indexed annuities and optional income riders that focuses on accumulation, income or both. Encourage your clients to plan ahead, understand the risks, evaluate often, and consider incorporating a fixed indexed annuity into their overall strategy today in order to obtain the retirement lifestyle they desire.

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1Employee Benefit Research Institute 2014 Retirement Confidence Survey. March 2014. Page 15, http://www.ebri.org/pdf/briefspdf/EBRI_IB_397_Mar14.RCS.pdf

2BureauofLaborStatistics Website, CPI Inflation Calculator. http://www.bls.gov/data/inflation_calculator.htm

3Employee Benefit Research Institute 2014 Retirement Confidence Survey. March 2014. Page 27, http://www.ebri.org/pdf/briefspdf/EBRI_IB_397_Mar14.RCS.pdf

4S&P 500®, finance.yahoo.com, accessed 10/03/13, time periods 03/20/2000 - 09/30/2002 (aprox. 44% drop) and 10/08/2007 - 03/02/2009 (aprox. 55% drop), http://finance.yahoo.com/q/hp?s=%5EGSPC+Historical+Prices

5Social Security Website. Calculators: Life Expectancy Home Page, http://www.socialsecurity.gov/planners/lifeexpectancy.htm

Guarantees provided by annuities are backed by the financial strength and claims-paying ability of the issuing insurance company and are not guaranteed by any bank or the FDIC. Guaranteed lifetime income available through annuitization or the purchase of an optional income rider for a charge. Annuities are long-term products of the insurance industry designed for retirement income. They contain limitations and exclusions, including withdrawal charges and a market value adjustment that will affect contract values.

This material has been prepared for informational and educational purposes only. This information is not sponsored or endorsed by any governmental agency. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice. Please consult with a professional specializing in these areas regarding the applicability of this information to your situation.

Under current tax law, the Internal Revenue Code already provides tax deferral to qualified money, so there is no additional tax benefit obtained by funding a qualified contract, such as an IRA, with an annuity; consider the other benefits provided by an annuity, such as lifetime income and a Death Benefit.

Fixed indexed annuities are not stock market investments and do not directly participate in any stock or equity investments. Market Indices may not include dividends paid on the underlying stocks, and therefore may not reflect the total return of the underlying stocks; neither an Index nor any market-indexed annuity is comparable to a direct investment in the equity markets. Clients who purchase indexed annuities are not directly investing in a stock market index.

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For agent use only. Not to be used with the offer or sale of annuities.