Emotions and Your Money...1 Emotions and Your Money 5 potentially costly mistakes and how to avoid them Welcome to our presentation on Emotions and Your Money. \爀圀攀 愀氀氀
44
1 Emotions and Your Money 5 potentially costly mistakes and how to avoid them
5 potentially costly mistakes and how to avoid them
Presenter
Presentation Notes
Welcome to our presentation on Emotions and Your Money 13We all know that emotions play an important role in the everyday decisions that we make especially when it comes to our financial matters Sometimes emotions like fear can benefit youmdashfor example scared investors who stayed in cash during the bear market of 2007-2009 may have avoided double-digit losses of 50 or more 13But other times this same fear can cause you to make costly investment mistakes For example investors who stayed out of the market through the end of 2009 would have missed out on one of the most impressive equity comebacks in recent history 13In this presentation wersquoll explore the different types of emotions that you could face as an investor Wersquoll also take a look at some of the most common emotional mistakes that investors make and show you time-tested strategies and valuable investment tips that can help you avoid these errors
2
Understanding Emotions
Presenter
Presentation Notes
Todayrsquos presentation will be divided into three sections13First wersquoll help you gain a better understanding of your emotions and how they can influence your investment decisions 13Next wersquoll discuss five of the most common and potentially costly mistakes that investors make and the different ways you may avoid these errors in your own investment portfolio 13And finally wersquoll highlight the keys to help you manage emotions stay calm and invest with potentially greater success in varying market conditions 13Letrsquos start by exploring the role emotions play in the decision-making process
Many psychologists believe that people are ldquohard-wiredrdquo to make
irrational emotional decisions
3
Presenter
Presentation Notes
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions Numerous studies have been conducted that show evidence of this irrational behavior Some of the most famous were conducted by Dr Daniel Kahneman one of the founding fathers of behavioral finance and the 2002 Nobel Prize winner for Economics 1313[Note to presenter]13You can read about studies that support this statement in books such as 13Judgment Under Uncertainty By Daniel Kahneman Paul Slovic and Amos Tversky Cambridge 1982 13The Winners Curse By Richard H Thaler Princeton 1992 13Predictably Irrational By Dan Ariely HarperCollins 2008 13Sway The Irresistible Pull of Irrational Behavior By Ori and Rom Brafman Currency 200813
4
One of the most common biases is Loss Aversion a psychological trait that makes losses seem twice
as painful as the pleasure of gains
Itrsquos known as a Psychological Bias
A tendency for the human brain to respond emotionally and make errors in judgment
when faced with uncertainty
Presenter
Presentation Notes
In his research Dr Kahneman found that most people have psychological biasesmdasha tendency to respond emotionally and make errors in judgment when faced with uncertainty One of the most common biases is Loss Aversion a psychological trait that makes losses seem twice as painful as the pleasure of gains
5
Letrsquos put this bias to the test
Which investment would you choose in each of the following scenarios
Source Prospect Theory An Analysis of Decision under Riskrdquo by Daniel Kahneman and Amos Tversky Econometrica XLVII (1979) 263-291
Presenter
Presentation Notes
Letrsquos put this bias to the test and see if you have an aversion for losses Wersquoll replicate a landmark 1979 study by Dr Daniel Kahneman and his colleague Amos Tversky in which they asked people to choose between two different investments 13Which investment would you choose in each of the following scenarios 1313Source Prospect Theory An Analysis of Decision under Riskrdquo by Daniel Kahneman and Amos Tversky Econometrica XLVII (1979) 263-291
6
Investment AOffers a sure gain of $500
If you had $1000 to invest would you select
Investment BOffers a 50 chance of either gaining $1000 or gaining nothing
OR
Scenario 1
Presenter
Presentation Notes
First letrsquos assume that you have savings of $1000 Would you rather have Investment A which provides you with a sure gain of $500 Or Investment B which offers a 50 chance of either gaining $1000 or gaining nothing1313
7
OR
Investment AOffers a sure loss of $500
If you had $2000 to invest would you select
Investment BOffers a 50 chance of either losing $1000 or losing nothing
Scenario 2
Presenter
Presentation Notes
Now letrsquos assume that you have savings of $2000 Would you prefer Investment A which provides you with a sure loss of $500 Or would you choose Investment B which offers you a 50 chance of either losing $1000 or losing nothing
8
Investment AOffers a sure gain of $500
Investment BOffers a 50 chance of either gaining $1000 or gaining nothing
OR
Investment AOffers a sure loss of $500
Investment BOffers a 50 chance of either losing $1000 or losing nothing
OR
Surprising results
69 chose this answer even though itrsquos the riskier choice
If yoursquore like most people you chose
84 chose this answer
Presenter
Presentation Notes
Based on logic alone your answers should be the same Either A or B for both scenarios since they would give you identical numerical results Letrsquos do the math 1313Scenario 1 13Investment A Savings of $1000 + $500 gain = $1500 13Investment B Savings of $1000 + ($1000 gain or $0 gain) = $1000 or $2000 1313Scenario 2 13Investment A Savings of $2000 - $500 loss = $150013Investment B Savings of $2000 ndash ($1000 loss or $0 loss) = $1000 or $20001313But if yoursquore like most people in Kahneman and Tverskyrsquos studies your answers were different You chose a sure gain of $500 (Answer A 84) for the first scenario and the 5050 chance to lose nothing for the second question (Answer B 69) even though itrsquos the riskier choice
9
Surprising results
Why did most people make this choice Because Loss Aversion causes you to take
on more risk to avoid a sure loss
Presenter
Presentation Notes
So why did you respond differently The reason is due to Loss Aversion People respond differently to the same situation depending on whether the choices are framed within the context of gains or losses In Scenario 1 yoursquore reluctant to take risks when faced with a sure gain of $500 However when faced with the certainty of losing $500 in Scenario 2 you become a risk-taker to avoid this sure loss
10
Psychological biases combined with the emotions of investing can lead to costly mistakes
Presenter
Presentation Notes
When you combine a psychological bias like loss aversion with the emotions of investing in a volatile market it can lead to costly investment mistakes 13In fact take a look at this cycle of emotional investing chart In bull markets when prices are going up investors typically experience an upward swing in emotions going from optimism to excitement to overconfidence But while investors may be happy at the top of the market this moment actually offers the greatest risk of loss 13The old adage says ldquobuy low and sell highrdquo but many investors do just the opposite They get so excited and overconfident that they simply follow the crowd investing at the top of a bull market just in time to see their portfoliorsquos value decline 13On the other hand in a down market investors may be overcome by fear and panic selling their stocks at the marketrsquos bottom However this point in the equity market cycle actually provides investors with the greatest opportunity for gains over time13
11
Presenter
Presentation Notes
As Dr Daniel Kahneman said ldquoThe more emotional event is the less sensible people arerdquo
12
Emotions and Investing
5 potentially costly mistakes and how to avoid them
Presenter
Presentation Notes
Now letrsquos answer the question 13What are five of the most common and potentially costly mistakes that investors make and what can you do to help avoid them
13
1 Impatience
bull Investment TrapTrading more frequently to try to quickly enhance returns
bull Unintended Consequence Potential for higher trading costs more taxes and lower returns
bull How to Avoid the Trap Build and follow an investment plan that can help you stay invested
Presenter
Presentation Notes
The first is Impatience 13In bull markets some investors get impatient waiting for their investments to increase in value They try to enhance performance by trading more frequently constantly moving in and out of equities in search of higher returns While this strategy can work if you pick the right stocks or time the market correctly it can also lead to higher trading costs more taxes and lower returns A more effective and consistent approach is to build a long-term financial plan that can help you stay invested through changing markets
14
Many investors donrsquot have the patience to stay invested
How long do you think most equity fund investors have remained in their investment over the last 20 years
Source 2018 Quantitative Analysis of Investment Behavior DALBAR
Only 36 years
Presenter
Presentation Notes
[Read the question on the slide and pause before providing the answer]
15
SampP 500 Index Average Equity Fund Investor
107
47
Source 2018 Quantitative Analysis of Investment Behavior DALBAR This study utilizes data from the Investment Company Institute and Standard amp Poorrsquos to compare investor behavior with the returns of the overall equity market The Average Equity Fund Investor represents the aggregate action of all investors in equity mutual funds Investor returns are determined using the change in total equity fund assets after excluding sales redemptions and exchanges This method of calculation captures realized and unrealized capital gains dividends interest trading costs sales charges fees expenses and any other costs The SampP 500 Index is an unmanaged index of large-cap US stocks that is considered to be representative of the US equity market
Moving in and out of the market can lead to lower returns
Investor behavior contributed to a performance gap of 60 per year over 30 years
Average annual returns over 30 years(12311987 ndash 12312017)
Presenter
Presentation Notes
Letrsquos take a look at how emotions like impatience can impact your portfoliorsquos return 13In their annual study of investor behavior and its impact on portfolio returns DALBAR Inc a leading investment research firm showed that while equities performed well over the 30 years from 123187 to 123117 investorsrsquo emotional decisions to buy sell and switch in and out of the market led to annual average returns of only 47 In comparison the SampP 500 Index generated average annual returns of 107 over the 30-year period Thatrsquos a difference of 60 per year 13Of course itrsquos important to keep in mind that the investor returns reflect investment selection as well as sales charges fees expenses and transaction costs whereas the SampP 500 Index returns do not These factors also contribute to the difference in returns The SampP 500 Index is an unmanaged index in which you cannot invest directly Past performance is not a guarantee of future results13[Please review the additional disclosures on the slide]1313131313
Chart1
Column1
107
47
Sheet1
16
bull Stay focused on strategy not emotions
bull Donrsquot get distracted by the short-term movement of the market
bull Remain on track with your long-term goals
Following a plan can help control emotions
Presenter
Presentation Notes
Why is following an investment plan important It can help you control your emotions in volatile times by13Staying focused on strategy not emotions13Keeping you from being distracted by the short-term movements of the equity market13Allowing you to remain on track with your long-term goals
17
2 Overconfidence
bull Investment Trap Relying on ldquohotrdquo investments to help boost your portfoliorsquos performance
bull Unintended Consequence Lower performance and increased risk of loss
bull How to Avoid the TrapDiversify and select investments based on research not emotions or hot tips
Note Diversification does not ensure a profit or protect against market loss
Presenter
Presentation Notes
Overconfidence is another emotion that can cause you to make potentially costly mistakes When yoursquore overconfident you may ignore key facts relying on momentum or hot tips from a friend to help boost your portfoliorsquos performance But chasing performance through overconfidence can have unintended consequences It can increase your risk of loss and potentially lower your returns over time You may avoid this investment trap by diversifying your assets and selecting investments based on research not emotions and hot tips
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
Column1
Column1
SampP 500 Index
107
Average Equity Fund Investor
47
To resize chart data range drag lower right corner of range
SampP 500 Index
Average Equity Fund Investor
2
Understanding Emotions
Presenter
Presentation Notes
Todayrsquos presentation will be divided into three sections13First wersquoll help you gain a better understanding of your emotions and how they can influence your investment decisions 13Next wersquoll discuss five of the most common and potentially costly mistakes that investors make and the different ways you may avoid these errors in your own investment portfolio 13And finally wersquoll highlight the keys to help you manage emotions stay calm and invest with potentially greater success in varying market conditions 13Letrsquos start by exploring the role emotions play in the decision-making process
Many psychologists believe that people are ldquohard-wiredrdquo to make
irrational emotional decisions
3
Presenter
Presentation Notes
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions Numerous studies have been conducted that show evidence of this irrational behavior Some of the most famous were conducted by Dr Daniel Kahneman one of the founding fathers of behavioral finance and the 2002 Nobel Prize winner for Economics 1313[Note to presenter]13You can read about studies that support this statement in books such as 13Judgment Under Uncertainty By Daniel Kahneman Paul Slovic and Amos Tversky Cambridge 1982 13The Winners Curse By Richard H Thaler Princeton 1992 13Predictably Irrational By Dan Ariely HarperCollins 2008 13Sway The Irresistible Pull of Irrational Behavior By Ori and Rom Brafman Currency 200813
4
One of the most common biases is Loss Aversion a psychological trait that makes losses seem twice
as painful as the pleasure of gains
Itrsquos known as a Psychological Bias
A tendency for the human brain to respond emotionally and make errors in judgment
when faced with uncertainty
Presenter
Presentation Notes
In his research Dr Kahneman found that most people have psychological biasesmdasha tendency to respond emotionally and make errors in judgment when faced with uncertainty One of the most common biases is Loss Aversion a psychological trait that makes losses seem twice as painful as the pleasure of gains
5
Letrsquos put this bias to the test
Which investment would you choose in each of the following scenarios
Source Prospect Theory An Analysis of Decision under Riskrdquo by Daniel Kahneman and Amos Tversky Econometrica XLVII (1979) 263-291
Presenter
Presentation Notes
Letrsquos put this bias to the test and see if you have an aversion for losses Wersquoll replicate a landmark 1979 study by Dr Daniel Kahneman and his colleague Amos Tversky in which they asked people to choose between two different investments 13Which investment would you choose in each of the following scenarios 1313Source Prospect Theory An Analysis of Decision under Riskrdquo by Daniel Kahneman and Amos Tversky Econometrica XLVII (1979) 263-291
6
Investment AOffers a sure gain of $500
If you had $1000 to invest would you select
Investment BOffers a 50 chance of either gaining $1000 or gaining nothing
OR
Scenario 1
Presenter
Presentation Notes
First letrsquos assume that you have savings of $1000 Would you rather have Investment A which provides you with a sure gain of $500 Or Investment B which offers a 50 chance of either gaining $1000 or gaining nothing1313
7
OR
Investment AOffers a sure loss of $500
If you had $2000 to invest would you select
Investment BOffers a 50 chance of either losing $1000 or losing nothing
Scenario 2
Presenter
Presentation Notes
Now letrsquos assume that you have savings of $2000 Would you prefer Investment A which provides you with a sure loss of $500 Or would you choose Investment B which offers you a 50 chance of either losing $1000 or losing nothing
8
Investment AOffers a sure gain of $500
Investment BOffers a 50 chance of either gaining $1000 or gaining nothing
OR
Investment AOffers a sure loss of $500
Investment BOffers a 50 chance of either losing $1000 or losing nothing
OR
Surprising results
69 chose this answer even though itrsquos the riskier choice
If yoursquore like most people you chose
84 chose this answer
Presenter
Presentation Notes
Based on logic alone your answers should be the same Either A or B for both scenarios since they would give you identical numerical results Letrsquos do the math 1313Scenario 1 13Investment A Savings of $1000 + $500 gain = $1500 13Investment B Savings of $1000 + ($1000 gain or $0 gain) = $1000 or $2000 1313Scenario 2 13Investment A Savings of $2000 - $500 loss = $150013Investment B Savings of $2000 ndash ($1000 loss or $0 loss) = $1000 or $20001313But if yoursquore like most people in Kahneman and Tverskyrsquos studies your answers were different You chose a sure gain of $500 (Answer A 84) for the first scenario and the 5050 chance to lose nothing for the second question (Answer B 69) even though itrsquos the riskier choice
9
Surprising results
Why did most people make this choice Because Loss Aversion causes you to take
on more risk to avoid a sure loss
Presenter
Presentation Notes
So why did you respond differently The reason is due to Loss Aversion People respond differently to the same situation depending on whether the choices are framed within the context of gains or losses In Scenario 1 yoursquore reluctant to take risks when faced with a sure gain of $500 However when faced with the certainty of losing $500 in Scenario 2 you become a risk-taker to avoid this sure loss
10
Psychological biases combined with the emotions of investing can lead to costly mistakes
Presenter
Presentation Notes
When you combine a psychological bias like loss aversion with the emotions of investing in a volatile market it can lead to costly investment mistakes 13In fact take a look at this cycle of emotional investing chart In bull markets when prices are going up investors typically experience an upward swing in emotions going from optimism to excitement to overconfidence But while investors may be happy at the top of the market this moment actually offers the greatest risk of loss 13The old adage says ldquobuy low and sell highrdquo but many investors do just the opposite They get so excited and overconfident that they simply follow the crowd investing at the top of a bull market just in time to see their portfoliorsquos value decline 13On the other hand in a down market investors may be overcome by fear and panic selling their stocks at the marketrsquos bottom However this point in the equity market cycle actually provides investors with the greatest opportunity for gains over time13
11
Presenter
Presentation Notes
As Dr Daniel Kahneman said ldquoThe more emotional event is the less sensible people arerdquo
12
Emotions and Investing
5 potentially costly mistakes and how to avoid them
Presenter
Presentation Notes
Now letrsquos answer the question 13What are five of the most common and potentially costly mistakes that investors make and what can you do to help avoid them
13
1 Impatience
bull Investment TrapTrading more frequently to try to quickly enhance returns
bull Unintended Consequence Potential for higher trading costs more taxes and lower returns
bull How to Avoid the Trap Build and follow an investment plan that can help you stay invested
Presenter
Presentation Notes
The first is Impatience 13In bull markets some investors get impatient waiting for their investments to increase in value They try to enhance performance by trading more frequently constantly moving in and out of equities in search of higher returns While this strategy can work if you pick the right stocks or time the market correctly it can also lead to higher trading costs more taxes and lower returns A more effective and consistent approach is to build a long-term financial plan that can help you stay invested through changing markets
14
Many investors donrsquot have the patience to stay invested
How long do you think most equity fund investors have remained in their investment over the last 20 years
Source 2018 Quantitative Analysis of Investment Behavior DALBAR
Only 36 years
Presenter
Presentation Notes
[Read the question on the slide and pause before providing the answer]
15
SampP 500 Index Average Equity Fund Investor
107
47
Source 2018 Quantitative Analysis of Investment Behavior DALBAR This study utilizes data from the Investment Company Institute and Standard amp Poorrsquos to compare investor behavior with the returns of the overall equity market The Average Equity Fund Investor represents the aggregate action of all investors in equity mutual funds Investor returns are determined using the change in total equity fund assets after excluding sales redemptions and exchanges This method of calculation captures realized and unrealized capital gains dividends interest trading costs sales charges fees expenses and any other costs The SampP 500 Index is an unmanaged index of large-cap US stocks that is considered to be representative of the US equity market
Moving in and out of the market can lead to lower returns
Investor behavior contributed to a performance gap of 60 per year over 30 years
Average annual returns over 30 years(12311987 ndash 12312017)
Presenter
Presentation Notes
Letrsquos take a look at how emotions like impatience can impact your portfoliorsquos return 13In their annual study of investor behavior and its impact on portfolio returns DALBAR Inc a leading investment research firm showed that while equities performed well over the 30 years from 123187 to 123117 investorsrsquo emotional decisions to buy sell and switch in and out of the market led to annual average returns of only 47 In comparison the SampP 500 Index generated average annual returns of 107 over the 30-year period Thatrsquos a difference of 60 per year 13Of course itrsquos important to keep in mind that the investor returns reflect investment selection as well as sales charges fees expenses and transaction costs whereas the SampP 500 Index returns do not These factors also contribute to the difference in returns The SampP 500 Index is an unmanaged index in which you cannot invest directly Past performance is not a guarantee of future results13[Please review the additional disclosures on the slide]1313131313
Chart1
Column1
107
47
Sheet1
16
bull Stay focused on strategy not emotions
bull Donrsquot get distracted by the short-term movement of the market
bull Remain on track with your long-term goals
Following a plan can help control emotions
Presenter
Presentation Notes
Why is following an investment plan important It can help you control your emotions in volatile times by13Staying focused on strategy not emotions13Keeping you from being distracted by the short-term movements of the equity market13Allowing you to remain on track with your long-term goals
17
2 Overconfidence
bull Investment Trap Relying on ldquohotrdquo investments to help boost your portfoliorsquos performance
bull Unintended Consequence Lower performance and increased risk of loss
bull How to Avoid the TrapDiversify and select investments based on research not emotions or hot tips
Note Diversification does not ensure a profit or protect against market loss
Presenter
Presentation Notes
Overconfidence is another emotion that can cause you to make potentially costly mistakes When yoursquore overconfident you may ignore key facts relying on momentum or hot tips from a friend to help boost your portfoliorsquos performance But chasing performance through overconfidence can have unintended consequences It can increase your risk of loss and potentially lower your returns over time You may avoid this investment trap by diversifying your assets and selecting investments based on research not emotions and hot tips
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
Column1
Column1
SampP 500 Index
107
Average Equity Fund Investor
47
To resize chart data range drag lower right corner of range
SampP 500 Index
Average Equity Fund Investor
Many psychologists believe that people are ldquohard-wiredrdquo to make
irrational emotional decisions
3
Presenter
Presentation Notes
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions Numerous studies have been conducted that show evidence of this irrational behavior Some of the most famous were conducted by Dr Daniel Kahneman one of the founding fathers of behavioral finance and the 2002 Nobel Prize winner for Economics 1313[Note to presenter]13You can read about studies that support this statement in books such as 13Judgment Under Uncertainty By Daniel Kahneman Paul Slovic and Amos Tversky Cambridge 1982 13The Winners Curse By Richard H Thaler Princeton 1992 13Predictably Irrational By Dan Ariely HarperCollins 2008 13Sway The Irresistible Pull of Irrational Behavior By Ori and Rom Brafman Currency 200813
4
One of the most common biases is Loss Aversion a psychological trait that makes losses seem twice
as painful as the pleasure of gains
Itrsquos known as a Psychological Bias
A tendency for the human brain to respond emotionally and make errors in judgment
when faced with uncertainty
Presenter
Presentation Notes
In his research Dr Kahneman found that most people have psychological biasesmdasha tendency to respond emotionally and make errors in judgment when faced with uncertainty One of the most common biases is Loss Aversion a psychological trait that makes losses seem twice as painful as the pleasure of gains
5
Letrsquos put this bias to the test
Which investment would you choose in each of the following scenarios
Source Prospect Theory An Analysis of Decision under Riskrdquo by Daniel Kahneman and Amos Tversky Econometrica XLVII (1979) 263-291
Presenter
Presentation Notes
Letrsquos put this bias to the test and see if you have an aversion for losses Wersquoll replicate a landmark 1979 study by Dr Daniel Kahneman and his colleague Amos Tversky in which they asked people to choose between two different investments 13Which investment would you choose in each of the following scenarios 1313Source Prospect Theory An Analysis of Decision under Riskrdquo by Daniel Kahneman and Amos Tversky Econometrica XLVII (1979) 263-291
6
Investment AOffers a sure gain of $500
If you had $1000 to invest would you select
Investment BOffers a 50 chance of either gaining $1000 or gaining nothing
OR
Scenario 1
Presenter
Presentation Notes
First letrsquos assume that you have savings of $1000 Would you rather have Investment A which provides you with a sure gain of $500 Or Investment B which offers a 50 chance of either gaining $1000 or gaining nothing1313
7
OR
Investment AOffers a sure loss of $500
If you had $2000 to invest would you select
Investment BOffers a 50 chance of either losing $1000 or losing nothing
Scenario 2
Presenter
Presentation Notes
Now letrsquos assume that you have savings of $2000 Would you prefer Investment A which provides you with a sure loss of $500 Or would you choose Investment B which offers you a 50 chance of either losing $1000 or losing nothing
8
Investment AOffers a sure gain of $500
Investment BOffers a 50 chance of either gaining $1000 or gaining nothing
OR
Investment AOffers a sure loss of $500
Investment BOffers a 50 chance of either losing $1000 or losing nothing
OR
Surprising results
69 chose this answer even though itrsquos the riskier choice
If yoursquore like most people you chose
84 chose this answer
Presenter
Presentation Notes
Based on logic alone your answers should be the same Either A or B for both scenarios since they would give you identical numerical results Letrsquos do the math 1313Scenario 1 13Investment A Savings of $1000 + $500 gain = $1500 13Investment B Savings of $1000 + ($1000 gain or $0 gain) = $1000 or $2000 1313Scenario 2 13Investment A Savings of $2000 - $500 loss = $150013Investment B Savings of $2000 ndash ($1000 loss or $0 loss) = $1000 or $20001313But if yoursquore like most people in Kahneman and Tverskyrsquos studies your answers were different You chose a sure gain of $500 (Answer A 84) for the first scenario and the 5050 chance to lose nothing for the second question (Answer B 69) even though itrsquos the riskier choice
9
Surprising results
Why did most people make this choice Because Loss Aversion causes you to take
on more risk to avoid a sure loss
Presenter
Presentation Notes
So why did you respond differently The reason is due to Loss Aversion People respond differently to the same situation depending on whether the choices are framed within the context of gains or losses In Scenario 1 yoursquore reluctant to take risks when faced with a sure gain of $500 However when faced with the certainty of losing $500 in Scenario 2 you become a risk-taker to avoid this sure loss
10
Psychological biases combined with the emotions of investing can lead to costly mistakes
Presenter
Presentation Notes
When you combine a psychological bias like loss aversion with the emotions of investing in a volatile market it can lead to costly investment mistakes 13In fact take a look at this cycle of emotional investing chart In bull markets when prices are going up investors typically experience an upward swing in emotions going from optimism to excitement to overconfidence But while investors may be happy at the top of the market this moment actually offers the greatest risk of loss 13The old adage says ldquobuy low and sell highrdquo but many investors do just the opposite They get so excited and overconfident that they simply follow the crowd investing at the top of a bull market just in time to see their portfoliorsquos value decline 13On the other hand in a down market investors may be overcome by fear and panic selling their stocks at the marketrsquos bottom However this point in the equity market cycle actually provides investors with the greatest opportunity for gains over time13
11
Presenter
Presentation Notes
As Dr Daniel Kahneman said ldquoThe more emotional event is the less sensible people arerdquo
12
Emotions and Investing
5 potentially costly mistakes and how to avoid them
Presenter
Presentation Notes
Now letrsquos answer the question 13What are five of the most common and potentially costly mistakes that investors make and what can you do to help avoid them
13
1 Impatience
bull Investment TrapTrading more frequently to try to quickly enhance returns
bull Unintended Consequence Potential for higher trading costs more taxes and lower returns
bull How to Avoid the Trap Build and follow an investment plan that can help you stay invested
Presenter
Presentation Notes
The first is Impatience 13In bull markets some investors get impatient waiting for their investments to increase in value They try to enhance performance by trading more frequently constantly moving in and out of equities in search of higher returns While this strategy can work if you pick the right stocks or time the market correctly it can also lead to higher trading costs more taxes and lower returns A more effective and consistent approach is to build a long-term financial plan that can help you stay invested through changing markets
14
Many investors donrsquot have the patience to stay invested
How long do you think most equity fund investors have remained in their investment over the last 20 years
Source 2018 Quantitative Analysis of Investment Behavior DALBAR
Only 36 years
Presenter
Presentation Notes
[Read the question on the slide and pause before providing the answer]
15
SampP 500 Index Average Equity Fund Investor
107
47
Source 2018 Quantitative Analysis of Investment Behavior DALBAR This study utilizes data from the Investment Company Institute and Standard amp Poorrsquos to compare investor behavior with the returns of the overall equity market The Average Equity Fund Investor represents the aggregate action of all investors in equity mutual funds Investor returns are determined using the change in total equity fund assets after excluding sales redemptions and exchanges This method of calculation captures realized and unrealized capital gains dividends interest trading costs sales charges fees expenses and any other costs The SampP 500 Index is an unmanaged index of large-cap US stocks that is considered to be representative of the US equity market
Moving in and out of the market can lead to lower returns
Investor behavior contributed to a performance gap of 60 per year over 30 years
Average annual returns over 30 years(12311987 ndash 12312017)
Presenter
Presentation Notes
Letrsquos take a look at how emotions like impatience can impact your portfoliorsquos return 13In their annual study of investor behavior and its impact on portfolio returns DALBAR Inc a leading investment research firm showed that while equities performed well over the 30 years from 123187 to 123117 investorsrsquo emotional decisions to buy sell and switch in and out of the market led to annual average returns of only 47 In comparison the SampP 500 Index generated average annual returns of 107 over the 30-year period Thatrsquos a difference of 60 per year 13Of course itrsquos important to keep in mind that the investor returns reflect investment selection as well as sales charges fees expenses and transaction costs whereas the SampP 500 Index returns do not These factors also contribute to the difference in returns The SampP 500 Index is an unmanaged index in which you cannot invest directly Past performance is not a guarantee of future results13[Please review the additional disclosures on the slide]1313131313
Chart1
Column1
107
47
Sheet1
16
bull Stay focused on strategy not emotions
bull Donrsquot get distracted by the short-term movement of the market
bull Remain on track with your long-term goals
Following a plan can help control emotions
Presenter
Presentation Notes
Why is following an investment plan important It can help you control your emotions in volatile times by13Staying focused on strategy not emotions13Keeping you from being distracted by the short-term movements of the equity market13Allowing you to remain on track with your long-term goals
17
2 Overconfidence
bull Investment Trap Relying on ldquohotrdquo investments to help boost your portfoliorsquos performance
bull Unintended Consequence Lower performance and increased risk of loss
bull How to Avoid the TrapDiversify and select investments based on research not emotions or hot tips
Note Diversification does not ensure a profit or protect against market loss
Presenter
Presentation Notes
Overconfidence is another emotion that can cause you to make potentially costly mistakes When yoursquore overconfident you may ignore key facts relying on momentum or hot tips from a friend to help boost your portfoliorsquos performance But chasing performance through overconfidence can have unintended consequences It can increase your risk of loss and potentially lower your returns over time You may avoid this investment trap by diversifying your assets and selecting investments based on research not emotions and hot tips
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
Column1
Column1
SampP 500 Index
107
Average Equity Fund Investor
47
To resize chart data range drag lower right corner of range
SampP 500 Index
Average Equity Fund Investor
4
One of the most common biases is Loss Aversion a psychological trait that makes losses seem twice
as painful as the pleasure of gains
Itrsquos known as a Psychological Bias
A tendency for the human brain to respond emotionally and make errors in judgment
when faced with uncertainty
Presenter
Presentation Notes
In his research Dr Kahneman found that most people have psychological biasesmdasha tendency to respond emotionally and make errors in judgment when faced with uncertainty One of the most common biases is Loss Aversion a psychological trait that makes losses seem twice as painful as the pleasure of gains
5
Letrsquos put this bias to the test
Which investment would you choose in each of the following scenarios
Source Prospect Theory An Analysis of Decision under Riskrdquo by Daniel Kahneman and Amos Tversky Econometrica XLVII (1979) 263-291
Presenter
Presentation Notes
Letrsquos put this bias to the test and see if you have an aversion for losses Wersquoll replicate a landmark 1979 study by Dr Daniel Kahneman and his colleague Amos Tversky in which they asked people to choose between two different investments 13Which investment would you choose in each of the following scenarios 1313Source Prospect Theory An Analysis of Decision under Riskrdquo by Daniel Kahneman and Amos Tversky Econometrica XLVII (1979) 263-291
6
Investment AOffers a sure gain of $500
If you had $1000 to invest would you select
Investment BOffers a 50 chance of either gaining $1000 or gaining nothing
OR
Scenario 1
Presenter
Presentation Notes
First letrsquos assume that you have savings of $1000 Would you rather have Investment A which provides you with a sure gain of $500 Or Investment B which offers a 50 chance of either gaining $1000 or gaining nothing1313
7
OR
Investment AOffers a sure loss of $500
If you had $2000 to invest would you select
Investment BOffers a 50 chance of either losing $1000 or losing nothing
Scenario 2
Presenter
Presentation Notes
Now letrsquos assume that you have savings of $2000 Would you prefer Investment A which provides you with a sure loss of $500 Or would you choose Investment B which offers you a 50 chance of either losing $1000 or losing nothing
8
Investment AOffers a sure gain of $500
Investment BOffers a 50 chance of either gaining $1000 or gaining nothing
OR
Investment AOffers a sure loss of $500
Investment BOffers a 50 chance of either losing $1000 or losing nothing
OR
Surprising results
69 chose this answer even though itrsquos the riskier choice
If yoursquore like most people you chose
84 chose this answer
Presenter
Presentation Notes
Based on logic alone your answers should be the same Either A or B for both scenarios since they would give you identical numerical results Letrsquos do the math 1313Scenario 1 13Investment A Savings of $1000 + $500 gain = $1500 13Investment B Savings of $1000 + ($1000 gain or $0 gain) = $1000 or $2000 1313Scenario 2 13Investment A Savings of $2000 - $500 loss = $150013Investment B Savings of $2000 ndash ($1000 loss or $0 loss) = $1000 or $20001313But if yoursquore like most people in Kahneman and Tverskyrsquos studies your answers were different You chose a sure gain of $500 (Answer A 84) for the first scenario and the 5050 chance to lose nothing for the second question (Answer B 69) even though itrsquos the riskier choice
9
Surprising results
Why did most people make this choice Because Loss Aversion causes you to take
on more risk to avoid a sure loss
Presenter
Presentation Notes
So why did you respond differently The reason is due to Loss Aversion People respond differently to the same situation depending on whether the choices are framed within the context of gains or losses In Scenario 1 yoursquore reluctant to take risks when faced with a sure gain of $500 However when faced with the certainty of losing $500 in Scenario 2 you become a risk-taker to avoid this sure loss
10
Psychological biases combined with the emotions of investing can lead to costly mistakes
Presenter
Presentation Notes
When you combine a psychological bias like loss aversion with the emotions of investing in a volatile market it can lead to costly investment mistakes 13In fact take a look at this cycle of emotional investing chart In bull markets when prices are going up investors typically experience an upward swing in emotions going from optimism to excitement to overconfidence But while investors may be happy at the top of the market this moment actually offers the greatest risk of loss 13The old adage says ldquobuy low and sell highrdquo but many investors do just the opposite They get so excited and overconfident that they simply follow the crowd investing at the top of a bull market just in time to see their portfoliorsquos value decline 13On the other hand in a down market investors may be overcome by fear and panic selling their stocks at the marketrsquos bottom However this point in the equity market cycle actually provides investors with the greatest opportunity for gains over time13
11
Presenter
Presentation Notes
As Dr Daniel Kahneman said ldquoThe more emotional event is the less sensible people arerdquo
12
Emotions and Investing
5 potentially costly mistakes and how to avoid them
Presenter
Presentation Notes
Now letrsquos answer the question 13What are five of the most common and potentially costly mistakes that investors make and what can you do to help avoid them
13
1 Impatience
bull Investment TrapTrading more frequently to try to quickly enhance returns
bull Unintended Consequence Potential for higher trading costs more taxes and lower returns
bull How to Avoid the Trap Build and follow an investment plan that can help you stay invested
Presenter
Presentation Notes
The first is Impatience 13In bull markets some investors get impatient waiting for their investments to increase in value They try to enhance performance by trading more frequently constantly moving in and out of equities in search of higher returns While this strategy can work if you pick the right stocks or time the market correctly it can also lead to higher trading costs more taxes and lower returns A more effective and consistent approach is to build a long-term financial plan that can help you stay invested through changing markets
14
Many investors donrsquot have the patience to stay invested
How long do you think most equity fund investors have remained in their investment over the last 20 years
Source 2018 Quantitative Analysis of Investment Behavior DALBAR
Only 36 years
Presenter
Presentation Notes
[Read the question on the slide and pause before providing the answer]
15
SampP 500 Index Average Equity Fund Investor
107
47
Source 2018 Quantitative Analysis of Investment Behavior DALBAR This study utilizes data from the Investment Company Institute and Standard amp Poorrsquos to compare investor behavior with the returns of the overall equity market The Average Equity Fund Investor represents the aggregate action of all investors in equity mutual funds Investor returns are determined using the change in total equity fund assets after excluding sales redemptions and exchanges This method of calculation captures realized and unrealized capital gains dividends interest trading costs sales charges fees expenses and any other costs The SampP 500 Index is an unmanaged index of large-cap US stocks that is considered to be representative of the US equity market
Moving in and out of the market can lead to lower returns
Investor behavior contributed to a performance gap of 60 per year over 30 years
Average annual returns over 30 years(12311987 ndash 12312017)
Presenter
Presentation Notes
Letrsquos take a look at how emotions like impatience can impact your portfoliorsquos return 13In their annual study of investor behavior and its impact on portfolio returns DALBAR Inc a leading investment research firm showed that while equities performed well over the 30 years from 123187 to 123117 investorsrsquo emotional decisions to buy sell and switch in and out of the market led to annual average returns of only 47 In comparison the SampP 500 Index generated average annual returns of 107 over the 30-year period Thatrsquos a difference of 60 per year 13Of course itrsquos important to keep in mind that the investor returns reflect investment selection as well as sales charges fees expenses and transaction costs whereas the SampP 500 Index returns do not These factors also contribute to the difference in returns The SampP 500 Index is an unmanaged index in which you cannot invest directly Past performance is not a guarantee of future results13[Please review the additional disclosures on the slide]1313131313
Chart1
Column1
107
47
Sheet1
16
bull Stay focused on strategy not emotions
bull Donrsquot get distracted by the short-term movement of the market
bull Remain on track with your long-term goals
Following a plan can help control emotions
Presenter
Presentation Notes
Why is following an investment plan important It can help you control your emotions in volatile times by13Staying focused on strategy not emotions13Keeping you from being distracted by the short-term movements of the equity market13Allowing you to remain on track with your long-term goals
17
2 Overconfidence
bull Investment Trap Relying on ldquohotrdquo investments to help boost your portfoliorsquos performance
bull Unintended Consequence Lower performance and increased risk of loss
bull How to Avoid the TrapDiversify and select investments based on research not emotions or hot tips
Note Diversification does not ensure a profit or protect against market loss
Presenter
Presentation Notes
Overconfidence is another emotion that can cause you to make potentially costly mistakes When yoursquore overconfident you may ignore key facts relying on momentum or hot tips from a friend to help boost your portfoliorsquos performance But chasing performance through overconfidence can have unintended consequences It can increase your risk of loss and potentially lower your returns over time You may avoid this investment trap by diversifying your assets and selecting investments based on research not emotions and hot tips
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
Column1
Column1
SampP 500 Index
107
Average Equity Fund Investor
47
To resize chart data range drag lower right corner of range
SampP 500 Index
Average Equity Fund Investor
5
Letrsquos put this bias to the test
Which investment would you choose in each of the following scenarios
Source Prospect Theory An Analysis of Decision under Riskrdquo by Daniel Kahneman and Amos Tversky Econometrica XLVII (1979) 263-291
Presenter
Presentation Notes
Letrsquos put this bias to the test and see if you have an aversion for losses Wersquoll replicate a landmark 1979 study by Dr Daniel Kahneman and his colleague Amos Tversky in which they asked people to choose between two different investments 13Which investment would you choose in each of the following scenarios 1313Source Prospect Theory An Analysis of Decision under Riskrdquo by Daniel Kahneman and Amos Tversky Econometrica XLVII (1979) 263-291
6
Investment AOffers a sure gain of $500
If you had $1000 to invest would you select
Investment BOffers a 50 chance of either gaining $1000 or gaining nothing
OR
Scenario 1
Presenter
Presentation Notes
First letrsquos assume that you have savings of $1000 Would you rather have Investment A which provides you with a sure gain of $500 Or Investment B which offers a 50 chance of either gaining $1000 or gaining nothing1313
7
OR
Investment AOffers a sure loss of $500
If you had $2000 to invest would you select
Investment BOffers a 50 chance of either losing $1000 or losing nothing
Scenario 2
Presenter
Presentation Notes
Now letrsquos assume that you have savings of $2000 Would you prefer Investment A which provides you with a sure loss of $500 Or would you choose Investment B which offers you a 50 chance of either losing $1000 or losing nothing
8
Investment AOffers a sure gain of $500
Investment BOffers a 50 chance of either gaining $1000 or gaining nothing
OR
Investment AOffers a sure loss of $500
Investment BOffers a 50 chance of either losing $1000 or losing nothing
OR
Surprising results
69 chose this answer even though itrsquos the riskier choice
If yoursquore like most people you chose
84 chose this answer
Presenter
Presentation Notes
Based on logic alone your answers should be the same Either A or B for both scenarios since they would give you identical numerical results Letrsquos do the math 1313Scenario 1 13Investment A Savings of $1000 + $500 gain = $1500 13Investment B Savings of $1000 + ($1000 gain or $0 gain) = $1000 or $2000 1313Scenario 2 13Investment A Savings of $2000 - $500 loss = $150013Investment B Savings of $2000 ndash ($1000 loss or $0 loss) = $1000 or $20001313But if yoursquore like most people in Kahneman and Tverskyrsquos studies your answers were different You chose a sure gain of $500 (Answer A 84) for the first scenario and the 5050 chance to lose nothing for the second question (Answer B 69) even though itrsquos the riskier choice
9
Surprising results
Why did most people make this choice Because Loss Aversion causes you to take
on more risk to avoid a sure loss
Presenter
Presentation Notes
So why did you respond differently The reason is due to Loss Aversion People respond differently to the same situation depending on whether the choices are framed within the context of gains or losses In Scenario 1 yoursquore reluctant to take risks when faced with a sure gain of $500 However when faced with the certainty of losing $500 in Scenario 2 you become a risk-taker to avoid this sure loss
10
Psychological biases combined with the emotions of investing can lead to costly mistakes
Presenter
Presentation Notes
When you combine a psychological bias like loss aversion with the emotions of investing in a volatile market it can lead to costly investment mistakes 13In fact take a look at this cycle of emotional investing chart In bull markets when prices are going up investors typically experience an upward swing in emotions going from optimism to excitement to overconfidence But while investors may be happy at the top of the market this moment actually offers the greatest risk of loss 13The old adage says ldquobuy low and sell highrdquo but many investors do just the opposite They get so excited and overconfident that they simply follow the crowd investing at the top of a bull market just in time to see their portfoliorsquos value decline 13On the other hand in a down market investors may be overcome by fear and panic selling their stocks at the marketrsquos bottom However this point in the equity market cycle actually provides investors with the greatest opportunity for gains over time13
11
Presenter
Presentation Notes
As Dr Daniel Kahneman said ldquoThe more emotional event is the less sensible people arerdquo
12
Emotions and Investing
5 potentially costly mistakes and how to avoid them
Presenter
Presentation Notes
Now letrsquos answer the question 13What are five of the most common and potentially costly mistakes that investors make and what can you do to help avoid them
13
1 Impatience
bull Investment TrapTrading more frequently to try to quickly enhance returns
bull Unintended Consequence Potential for higher trading costs more taxes and lower returns
bull How to Avoid the Trap Build and follow an investment plan that can help you stay invested
Presenter
Presentation Notes
The first is Impatience 13In bull markets some investors get impatient waiting for their investments to increase in value They try to enhance performance by trading more frequently constantly moving in and out of equities in search of higher returns While this strategy can work if you pick the right stocks or time the market correctly it can also lead to higher trading costs more taxes and lower returns A more effective and consistent approach is to build a long-term financial plan that can help you stay invested through changing markets
14
Many investors donrsquot have the patience to stay invested
How long do you think most equity fund investors have remained in their investment over the last 20 years
Source 2018 Quantitative Analysis of Investment Behavior DALBAR
Only 36 years
Presenter
Presentation Notes
[Read the question on the slide and pause before providing the answer]
15
SampP 500 Index Average Equity Fund Investor
107
47
Source 2018 Quantitative Analysis of Investment Behavior DALBAR This study utilizes data from the Investment Company Institute and Standard amp Poorrsquos to compare investor behavior with the returns of the overall equity market The Average Equity Fund Investor represents the aggregate action of all investors in equity mutual funds Investor returns are determined using the change in total equity fund assets after excluding sales redemptions and exchanges This method of calculation captures realized and unrealized capital gains dividends interest trading costs sales charges fees expenses and any other costs The SampP 500 Index is an unmanaged index of large-cap US stocks that is considered to be representative of the US equity market
Moving in and out of the market can lead to lower returns
Investor behavior contributed to a performance gap of 60 per year over 30 years
Average annual returns over 30 years(12311987 ndash 12312017)
Presenter
Presentation Notes
Letrsquos take a look at how emotions like impatience can impact your portfoliorsquos return 13In their annual study of investor behavior and its impact on portfolio returns DALBAR Inc a leading investment research firm showed that while equities performed well over the 30 years from 123187 to 123117 investorsrsquo emotional decisions to buy sell and switch in and out of the market led to annual average returns of only 47 In comparison the SampP 500 Index generated average annual returns of 107 over the 30-year period Thatrsquos a difference of 60 per year 13Of course itrsquos important to keep in mind that the investor returns reflect investment selection as well as sales charges fees expenses and transaction costs whereas the SampP 500 Index returns do not These factors also contribute to the difference in returns The SampP 500 Index is an unmanaged index in which you cannot invest directly Past performance is not a guarantee of future results13[Please review the additional disclosures on the slide]1313131313
Chart1
Column1
107
47
Sheet1
16
bull Stay focused on strategy not emotions
bull Donrsquot get distracted by the short-term movement of the market
bull Remain on track with your long-term goals
Following a plan can help control emotions
Presenter
Presentation Notes
Why is following an investment plan important It can help you control your emotions in volatile times by13Staying focused on strategy not emotions13Keeping you from being distracted by the short-term movements of the equity market13Allowing you to remain on track with your long-term goals
17
2 Overconfidence
bull Investment Trap Relying on ldquohotrdquo investments to help boost your portfoliorsquos performance
bull Unintended Consequence Lower performance and increased risk of loss
bull How to Avoid the TrapDiversify and select investments based on research not emotions or hot tips
Note Diversification does not ensure a profit or protect against market loss
Presenter
Presentation Notes
Overconfidence is another emotion that can cause you to make potentially costly mistakes When yoursquore overconfident you may ignore key facts relying on momentum or hot tips from a friend to help boost your portfoliorsquos performance But chasing performance through overconfidence can have unintended consequences It can increase your risk of loss and potentially lower your returns over time You may avoid this investment trap by diversifying your assets and selecting investments based on research not emotions and hot tips
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
Column1
Column1
SampP 500 Index
107
Average Equity Fund Investor
47
To resize chart data range drag lower right corner of range
SampP 500 Index
Average Equity Fund Investor
6
Investment AOffers a sure gain of $500
If you had $1000 to invest would you select
Investment BOffers a 50 chance of either gaining $1000 or gaining nothing
OR
Scenario 1
Presenter
Presentation Notes
First letrsquos assume that you have savings of $1000 Would you rather have Investment A which provides you with a sure gain of $500 Or Investment B which offers a 50 chance of either gaining $1000 or gaining nothing1313
7
OR
Investment AOffers a sure loss of $500
If you had $2000 to invest would you select
Investment BOffers a 50 chance of either losing $1000 or losing nothing
Scenario 2
Presenter
Presentation Notes
Now letrsquos assume that you have savings of $2000 Would you prefer Investment A which provides you with a sure loss of $500 Or would you choose Investment B which offers you a 50 chance of either losing $1000 or losing nothing
8
Investment AOffers a sure gain of $500
Investment BOffers a 50 chance of either gaining $1000 or gaining nothing
OR
Investment AOffers a sure loss of $500
Investment BOffers a 50 chance of either losing $1000 or losing nothing
OR
Surprising results
69 chose this answer even though itrsquos the riskier choice
If yoursquore like most people you chose
84 chose this answer
Presenter
Presentation Notes
Based on logic alone your answers should be the same Either A or B for both scenarios since they would give you identical numerical results Letrsquos do the math 1313Scenario 1 13Investment A Savings of $1000 + $500 gain = $1500 13Investment B Savings of $1000 + ($1000 gain or $0 gain) = $1000 or $2000 1313Scenario 2 13Investment A Savings of $2000 - $500 loss = $150013Investment B Savings of $2000 ndash ($1000 loss or $0 loss) = $1000 or $20001313But if yoursquore like most people in Kahneman and Tverskyrsquos studies your answers were different You chose a sure gain of $500 (Answer A 84) for the first scenario and the 5050 chance to lose nothing for the second question (Answer B 69) even though itrsquos the riskier choice
9
Surprising results
Why did most people make this choice Because Loss Aversion causes you to take
on more risk to avoid a sure loss
Presenter
Presentation Notes
So why did you respond differently The reason is due to Loss Aversion People respond differently to the same situation depending on whether the choices are framed within the context of gains or losses In Scenario 1 yoursquore reluctant to take risks when faced with a sure gain of $500 However when faced with the certainty of losing $500 in Scenario 2 you become a risk-taker to avoid this sure loss
10
Psychological biases combined with the emotions of investing can lead to costly mistakes
Presenter
Presentation Notes
When you combine a psychological bias like loss aversion with the emotions of investing in a volatile market it can lead to costly investment mistakes 13In fact take a look at this cycle of emotional investing chart In bull markets when prices are going up investors typically experience an upward swing in emotions going from optimism to excitement to overconfidence But while investors may be happy at the top of the market this moment actually offers the greatest risk of loss 13The old adage says ldquobuy low and sell highrdquo but many investors do just the opposite They get so excited and overconfident that they simply follow the crowd investing at the top of a bull market just in time to see their portfoliorsquos value decline 13On the other hand in a down market investors may be overcome by fear and panic selling their stocks at the marketrsquos bottom However this point in the equity market cycle actually provides investors with the greatest opportunity for gains over time13
11
Presenter
Presentation Notes
As Dr Daniel Kahneman said ldquoThe more emotional event is the less sensible people arerdquo
12
Emotions and Investing
5 potentially costly mistakes and how to avoid them
Presenter
Presentation Notes
Now letrsquos answer the question 13What are five of the most common and potentially costly mistakes that investors make and what can you do to help avoid them
13
1 Impatience
bull Investment TrapTrading more frequently to try to quickly enhance returns
bull Unintended Consequence Potential for higher trading costs more taxes and lower returns
bull How to Avoid the Trap Build and follow an investment plan that can help you stay invested
Presenter
Presentation Notes
The first is Impatience 13In bull markets some investors get impatient waiting for their investments to increase in value They try to enhance performance by trading more frequently constantly moving in and out of equities in search of higher returns While this strategy can work if you pick the right stocks or time the market correctly it can also lead to higher trading costs more taxes and lower returns A more effective and consistent approach is to build a long-term financial plan that can help you stay invested through changing markets
14
Many investors donrsquot have the patience to stay invested
How long do you think most equity fund investors have remained in their investment over the last 20 years
Source 2018 Quantitative Analysis of Investment Behavior DALBAR
Only 36 years
Presenter
Presentation Notes
[Read the question on the slide and pause before providing the answer]
15
SampP 500 Index Average Equity Fund Investor
107
47
Source 2018 Quantitative Analysis of Investment Behavior DALBAR This study utilizes data from the Investment Company Institute and Standard amp Poorrsquos to compare investor behavior with the returns of the overall equity market The Average Equity Fund Investor represents the aggregate action of all investors in equity mutual funds Investor returns are determined using the change in total equity fund assets after excluding sales redemptions and exchanges This method of calculation captures realized and unrealized capital gains dividends interest trading costs sales charges fees expenses and any other costs The SampP 500 Index is an unmanaged index of large-cap US stocks that is considered to be representative of the US equity market
Moving in and out of the market can lead to lower returns
Investor behavior contributed to a performance gap of 60 per year over 30 years
Average annual returns over 30 years(12311987 ndash 12312017)
Presenter
Presentation Notes
Letrsquos take a look at how emotions like impatience can impact your portfoliorsquos return 13In their annual study of investor behavior and its impact on portfolio returns DALBAR Inc a leading investment research firm showed that while equities performed well over the 30 years from 123187 to 123117 investorsrsquo emotional decisions to buy sell and switch in and out of the market led to annual average returns of only 47 In comparison the SampP 500 Index generated average annual returns of 107 over the 30-year period Thatrsquos a difference of 60 per year 13Of course itrsquos important to keep in mind that the investor returns reflect investment selection as well as sales charges fees expenses and transaction costs whereas the SampP 500 Index returns do not These factors also contribute to the difference in returns The SampP 500 Index is an unmanaged index in which you cannot invest directly Past performance is not a guarantee of future results13[Please review the additional disclosures on the slide]1313131313
Chart1
Column1
107
47
Sheet1
16
bull Stay focused on strategy not emotions
bull Donrsquot get distracted by the short-term movement of the market
bull Remain on track with your long-term goals
Following a plan can help control emotions
Presenter
Presentation Notes
Why is following an investment plan important It can help you control your emotions in volatile times by13Staying focused on strategy not emotions13Keeping you from being distracted by the short-term movements of the equity market13Allowing you to remain on track with your long-term goals
17
2 Overconfidence
bull Investment Trap Relying on ldquohotrdquo investments to help boost your portfoliorsquos performance
bull Unintended Consequence Lower performance and increased risk of loss
bull How to Avoid the TrapDiversify and select investments based on research not emotions or hot tips
Note Diversification does not ensure a profit or protect against market loss
Presenter
Presentation Notes
Overconfidence is another emotion that can cause you to make potentially costly mistakes When yoursquore overconfident you may ignore key facts relying on momentum or hot tips from a friend to help boost your portfoliorsquos performance But chasing performance through overconfidence can have unintended consequences It can increase your risk of loss and potentially lower your returns over time You may avoid this investment trap by diversifying your assets and selecting investments based on research not emotions and hot tips
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
Column1
Column1
SampP 500 Index
107
Average Equity Fund Investor
47
To resize chart data range drag lower right corner of range
SampP 500 Index
Average Equity Fund Investor
7
OR
Investment AOffers a sure loss of $500
If you had $2000 to invest would you select
Investment BOffers a 50 chance of either losing $1000 or losing nothing
Scenario 2
Presenter
Presentation Notes
Now letrsquos assume that you have savings of $2000 Would you prefer Investment A which provides you with a sure loss of $500 Or would you choose Investment B which offers you a 50 chance of either losing $1000 or losing nothing
8
Investment AOffers a sure gain of $500
Investment BOffers a 50 chance of either gaining $1000 or gaining nothing
OR
Investment AOffers a sure loss of $500
Investment BOffers a 50 chance of either losing $1000 or losing nothing
OR
Surprising results
69 chose this answer even though itrsquos the riskier choice
If yoursquore like most people you chose
84 chose this answer
Presenter
Presentation Notes
Based on logic alone your answers should be the same Either A or B for both scenarios since they would give you identical numerical results Letrsquos do the math 1313Scenario 1 13Investment A Savings of $1000 + $500 gain = $1500 13Investment B Savings of $1000 + ($1000 gain or $0 gain) = $1000 or $2000 1313Scenario 2 13Investment A Savings of $2000 - $500 loss = $150013Investment B Savings of $2000 ndash ($1000 loss or $0 loss) = $1000 or $20001313But if yoursquore like most people in Kahneman and Tverskyrsquos studies your answers were different You chose a sure gain of $500 (Answer A 84) for the first scenario and the 5050 chance to lose nothing for the second question (Answer B 69) even though itrsquos the riskier choice
9
Surprising results
Why did most people make this choice Because Loss Aversion causes you to take
on more risk to avoid a sure loss
Presenter
Presentation Notes
So why did you respond differently The reason is due to Loss Aversion People respond differently to the same situation depending on whether the choices are framed within the context of gains or losses In Scenario 1 yoursquore reluctant to take risks when faced with a sure gain of $500 However when faced with the certainty of losing $500 in Scenario 2 you become a risk-taker to avoid this sure loss
10
Psychological biases combined with the emotions of investing can lead to costly mistakes
Presenter
Presentation Notes
When you combine a psychological bias like loss aversion with the emotions of investing in a volatile market it can lead to costly investment mistakes 13In fact take a look at this cycle of emotional investing chart In bull markets when prices are going up investors typically experience an upward swing in emotions going from optimism to excitement to overconfidence But while investors may be happy at the top of the market this moment actually offers the greatest risk of loss 13The old adage says ldquobuy low and sell highrdquo but many investors do just the opposite They get so excited and overconfident that they simply follow the crowd investing at the top of a bull market just in time to see their portfoliorsquos value decline 13On the other hand in a down market investors may be overcome by fear and panic selling their stocks at the marketrsquos bottom However this point in the equity market cycle actually provides investors with the greatest opportunity for gains over time13
11
Presenter
Presentation Notes
As Dr Daniel Kahneman said ldquoThe more emotional event is the less sensible people arerdquo
12
Emotions and Investing
5 potentially costly mistakes and how to avoid them
Presenter
Presentation Notes
Now letrsquos answer the question 13What are five of the most common and potentially costly mistakes that investors make and what can you do to help avoid them
13
1 Impatience
bull Investment TrapTrading more frequently to try to quickly enhance returns
bull Unintended Consequence Potential for higher trading costs more taxes and lower returns
bull How to Avoid the Trap Build and follow an investment plan that can help you stay invested
Presenter
Presentation Notes
The first is Impatience 13In bull markets some investors get impatient waiting for their investments to increase in value They try to enhance performance by trading more frequently constantly moving in and out of equities in search of higher returns While this strategy can work if you pick the right stocks or time the market correctly it can also lead to higher trading costs more taxes and lower returns A more effective and consistent approach is to build a long-term financial plan that can help you stay invested through changing markets
14
Many investors donrsquot have the patience to stay invested
How long do you think most equity fund investors have remained in their investment over the last 20 years
Source 2018 Quantitative Analysis of Investment Behavior DALBAR
Only 36 years
Presenter
Presentation Notes
[Read the question on the slide and pause before providing the answer]
15
SampP 500 Index Average Equity Fund Investor
107
47
Source 2018 Quantitative Analysis of Investment Behavior DALBAR This study utilizes data from the Investment Company Institute and Standard amp Poorrsquos to compare investor behavior with the returns of the overall equity market The Average Equity Fund Investor represents the aggregate action of all investors in equity mutual funds Investor returns are determined using the change in total equity fund assets after excluding sales redemptions and exchanges This method of calculation captures realized and unrealized capital gains dividends interest trading costs sales charges fees expenses and any other costs The SampP 500 Index is an unmanaged index of large-cap US stocks that is considered to be representative of the US equity market
Moving in and out of the market can lead to lower returns
Investor behavior contributed to a performance gap of 60 per year over 30 years
Average annual returns over 30 years(12311987 ndash 12312017)
Presenter
Presentation Notes
Letrsquos take a look at how emotions like impatience can impact your portfoliorsquos return 13In their annual study of investor behavior and its impact on portfolio returns DALBAR Inc a leading investment research firm showed that while equities performed well over the 30 years from 123187 to 123117 investorsrsquo emotional decisions to buy sell and switch in and out of the market led to annual average returns of only 47 In comparison the SampP 500 Index generated average annual returns of 107 over the 30-year period Thatrsquos a difference of 60 per year 13Of course itrsquos important to keep in mind that the investor returns reflect investment selection as well as sales charges fees expenses and transaction costs whereas the SampP 500 Index returns do not These factors also contribute to the difference in returns The SampP 500 Index is an unmanaged index in which you cannot invest directly Past performance is not a guarantee of future results13[Please review the additional disclosures on the slide]1313131313
Chart1
Column1
107
47
Sheet1
16
bull Stay focused on strategy not emotions
bull Donrsquot get distracted by the short-term movement of the market
bull Remain on track with your long-term goals
Following a plan can help control emotions
Presenter
Presentation Notes
Why is following an investment plan important It can help you control your emotions in volatile times by13Staying focused on strategy not emotions13Keeping you from being distracted by the short-term movements of the equity market13Allowing you to remain on track with your long-term goals
17
2 Overconfidence
bull Investment Trap Relying on ldquohotrdquo investments to help boost your portfoliorsquos performance
bull Unintended Consequence Lower performance and increased risk of loss
bull How to Avoid the TrapDiversify and select investments based on research not emotions or hot tips
Note Diversification does not ensure a profit or protect against market loss
Presenter
Presentation Notes
Overconfidence is another emotion that can cause you to make potentially costly mistakes When yoursquore overconfident you may ignore key facts relying on momentum or hot tips from a friend to help boost your portfoliorsquos performance But chasing performance through overconfidence can have unintended consequences It can increase your risk of loss and potentially lower your returns over time You may avoid this investment trap by diversifying your assets and selecting investments based on research not emotions and hot tips
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
Column1
Column1
SampP 500 Index
107
Average Equity Fund Investor
47
To resize chart data range drag lower right corner of range
SampP 500 Index
Average Equity Fund Investor
8
Investment AOffers a sure gain of $500
Investment BOffers a 50 chance of either gaining $1000 or gaining nothing
OR
Investment AOffers a sure loss of $500
Investment BOffers a 50 chance of either losing $1000 or losing nothing
OR
Surprising results
69 chose this answer even though itrsquos the riskier choice
If yoursquore like most people you chose
84 chose this answer
Presenter
Presentation Notes
Based on logic alone your answers should be the same Either A or B for both scenarios since they would give you identical numerical results Letrsquos do the math 1313Scenario 1 13Investment A Savings of $1000 + $500 gain = $1500 13Investment B Savings of $1000 + ($1000 gain or $0 gain) = $1000 or $2000 1313Scenario 2 13Investment A Savings of $2000 - $500 loss = $150013Investment B Savings of $2000 ndash ($1000 loss or $0 loss) = $1000 or $20001313But if yoursquore like most people in Kahneman and Tverskyrsquos studies your answers were different You chose a sure gain of $500 (Answer A 84) for the first scenario and the 5050 chance to lose nothing for the second question (Answer B 69) even though itrsquos the riskier choice
9
Surprising results
Why did most people make this choice Because Loss Aversion causes you to take
on more risk to avoid a sure loss
Presenter
Presentation Notes
So why did you respond differently The reason is due to Loss Aversion People respond differently to the same situation depending on whether the choices are framed within the context of gains or losses In Scenario 1 yoursquore reluctant to take risks when faced with a sure gain of $500 However when faced with the certainty of losing $500 in Scenario 2 you become a risk-taker to avoid this sure loss
10
Psychological biases combined with the emotions of investing can lead to costly mistakes
Presenter
Presentation Notes
When you combine a psychological bias like loss aversion with the emotions of investing in a volatile market it can lead to costly investment mistakes 13In fact take a look at this cycle of emotional investing chart In bull markets when prices are going up investors typically experience an upward swing in emotions going from optimism to excitement to overconfidence But while investors may be happy at the top of the market this moment actually offers the greatest risk of loss 13The old adage says ldquobuy low and sell highrdquo but many investors do just the opposite They get so excited and overconfident that they simply follow the crowd investing at the top of a bull market just in time to see their portfoliorsquos value decline 13On the other hand in a down market investors may be overcome by fear and panic selling their stocks at the marketrsquos bottom However this point in the equity market cycle actually provides investors with the greatest opportunity for gains over time13
11
Presenter
Presentation Notes
As Dr Daniel Kahneman said ldquoThe more emotional event is the less sensible people arerdquo
12
Emotions and Investing
5 potentially costly mistakes and how to avoid them
Presenter
Presentation Notes
Now letrsquos answer the question 13What are five of the most common and potentially costly mistakes that investors make and what can you do to help avoid them
13
1 Impatience
bull Investment TrapTrading more frequently to try to quickly enhance returns
bull Unintended Consequence Potential for higher trading costs more taxes and lower returns
bull How to Avoid the Trap Build and follow an investment plan that can help you stay invested
Presenter
Presentation Notes
The first is Impatience 13In bull markets some investors get impatient waiting for their investments to increase in value They try to enhance performance by trading more frequently constantly moving in and out of equities in search of higher returns While this strategy can work if you pick the right stocks or time the market correctly it can also lead to higher trading costs more taxes and lower returns A more effective and consistent approach is to build a long-term financial plan that can help you stay invested through changing markets
14
Many investors donrsquot have the patience to stay invested
How long do you think most equity fund investors have remained in their investment over the last 20 years
Source 2018 Quantitative Analysis of Investment Behavior DALBAR
Only 36 years
Presenter
Presentation Notes
[Read the question on the slide and pause before providing the answer]
15
SampP 500 Index Average Equity Fund Investor
107
47
Source 2018 Quantitative Analysis of Investment Behavior DALBAR This study utilizes data from the Investment Company Institute and Standard amp Poorrsquos to compare investor behavior with the returns of the overall equity market The Average Equity Fund Investor represents the aggregate action of all investors in equity mutual funds Investor returns are determined using the change in total equity fund assets after excluding sales redemptions and exchanges This method of calculation captures realized and unrealized capital gains dividends interest trading costs sales charges fees expenses and any other costs The SampP 500 Index is an unmanaged index of large-cap US stocks that is considered to be representative of the US equity market
Moving in and out of the market can lead to lower returns
Investor behavior contributed to a performance gap of 60 per year over 30 years
Average annual returns over 30 years(12311987 ndash 12312017)
Presenter
Presentation Notes
Letrsquos take a look at how emotions like impatience can impact your portfoliorsquos return 13In their annual study of investor behavior and its impact on portfolio returns DALBAR Inc a leading investment research firm showed that while equities performed well over the 30 years from 123187 to 123117 investorsrsquo emotional decisions to buy sell and switch in and out of the market led to annual average returns of only 47 In comparison the SampP 500 Index generated average annual returns of 107 over the 30-year period Thatrsquos a difference of 60 per year 13Of course itrsquos important to keep in mind that the investor returns reflect investment selection as well as sales charges fees expenses and transaction costs whereas the SampP 500 Index returns do not These factors also contribute to the difference in returns The SampP 500 Index is an unmanaged index in which you cannot invest directly Past performance is not a guarantee of future results13[Please review the additional disclosures on the slide]1313131313
Chart1
Column1
107
47
Sheet1
16
bull Stay focused on strategy not emotions
bull Donrsquot get distracted by the short-term movement of the market
bull Remain on track with your long-term goals
Following a plan can help control emotions
Presenter
Presentation Notes
Why is following an investment plan important It can help you control your emotions in volatile times by13Staying focused on strategy not emotions13Keeping you from being distracted by the short-term movements of the equity market13Allowing you to remain on track with your long-term goals
17
2 Overconfidence
bull Investment Trap Relying on ldquohotrdquo investments to help boost your portfoliorsquos performance
bull Unintended Consequence Lower performance and increased risk of loss
bull How to Avoid the TrapDiversify and select investments based on research not emotions or hot tips
Note Diversification does not ensure a profit or protect against market loss
Presenter
Presentation Notes
Overconfidence is another emotion that can cause you to make potentially costly mistakes When yoursquore overconfident you may ignore key facts relying on momentum or hot tips from a friend to help boost your portfoliorsquos performance But chasing performance through overconfidence can have unintended consequences It can increase your risk of loss and potentially lower your returns over time You may avoid this investment trap by diversifying your assets and selecting investments based on research not emotions and hot tips
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
Column1
Column1
SampP 500 Index
107
Average Equity Fund Investor
47
To resize chart data range drag lower right corner of range
SampP 500 Index
Average Equity Fund Investor
9
Surprising results
Why did most people make this choice Because Loss Aversion causes you to take
on more risk to avoid a sure loss
Presenter
Presentation Notes
So why did you respond differently The reason is due to Loss Aversion People respond differently to the same situation depending on whether the choices are framed within the context of gains or losses In Scenario 1 yoursquore reluctant to take risks when faced with a sure gain of $500 However when faced with the certainty of losing $500 in Scenario 2 you become a risk-taker to avoid this sure loss
10
Psychological biases combined with the emotions of investing can lead to costly mistakes
Presenter
Presentation Notes
When you combine a psychological bias like loss aversion with the emotions of investing in a volatile market it can lead to costly investment mistakes 13In fact take a look at this cycle of emotional investing chart In bull markets when prices are going up investors typically experience an upward swing in emotions going from optimism to excitement to overconfidence But while investors may be happy at the top of the market this moment actually offers the greatest risk of loss 13The old adage says ldquobuy low and sell highrdquo but many investors do just the opposite They get so excited and overconfident that they simply follow the crowd investing at the top of a bull market just in time to see their portfoliorsquos value decline 13On the other hand in a down market investors may be overcome by fear and panic selling their stocks at the marketrsquos bottom However this point in the equity market cycle actually provides investors with the greatest opportunity for gains over time13
11
Presenter
Presentation Notes
As Dr Daniel Kahneman said ldquoThe more emotional event is the less sensible people arerdquo
12
Emotions and Investing
5 potentially costly mistakes and how to avoid them
Presenter
Presentation Notes
Now letrsquos answer the question 13What are five of the most common and potentially costly mistakes that investors make and what can you do to help avoid them
13
1 Impatience
bull Investment TrapTrading more frequently to try to quickly enhance returns
bull Unintended Consequence Potential for higher trading costs more taxes and lower returns
bull How to Avoid the Trap Build and follow an investment plan that can help you stay invested
Presenter
Presentation Notes
The first is Impatience 13In bull markets some investors get impatient waiting for their investments to increase in value They try to enhance performance by trading more frequently constantly moving in and out of equities in search of higher returns While this strategy can work if you pick the right stocks or time the market correctly it can also lead to higher trading costs more taxes and lower returns A more effective and consistent approach is to build a long-term financial plan that can help you stay invested through changing markets
14
Many investors donrsquot have the patience to stay invested
How long do you think most equity fund investors have remained in their investment over the last 20 years
Source 2018 Quantitative Analysis of Investment Behavior DALBAR
Only 36 years
Presenter
Presentation Notes
[Read the question on the slide and pause before providing the answer]
15
SampP 500 Index Average Equity Fund Investor
107
47
Source 2018 Quantitative Analysis of Investment Behavior DALBAR This study utilizes data from the Investment Company Institute and Standard amp Poorrsquos to compare investor behavior with the returns of the overall equity market The Average Equity Fund Investor represents the aggregate action of all investors in equity mutual funds Investor returns are determined using the change in total equity fund assets after excluding sales redemptions and exchanges This method of calculation captures realized and unrealized capital gains dividends interest trading costs sales charges fees expenses and any other costs The SampP 500 Index is an unmanaged index of large-cap US stocks that is considered to be representative of the US equity market
Moving in and out of the market can lead to lower returns
Investor behavior contributed to a performance gap of 60 per year over 30 years
Average annual returns over 30 years(12311987 ndash 12312017)
Presenter
Presentation Notes
Letrsquos take a look at how emotions like impatience can impact your portfoliorsquos return 13In their annual study of investor behavior and its impact on portfolio returns DALBAR Inc a leading investment research firm showed that while equities performed well over the 30 years from 123187 to 123117 investorsrsquo emotional decisions to buy sell and switch in and out of the market led to annual average returns of only 47 In comparison the SampP 500 Index generated average annual returns of 107 over the 30-year period Thatrsquos a difference of 60 per year 13Of course itrsquos important to keep in mind that the investor returns reflect investment selection as well as sales charges fees expenses and transaction costs whereas the SampP 500 Index returns do not These factors also contribute to the difference in returns The SampP 500 Index is an unmanaged index in which you cannot invest directly Past performance is not a guarantee of future results13[Please review the additional disclosures on the slide]1313131313
Chart1
Column1
107
47
Sheet1
16
bull Stay focused on strategy not emotions
bull Donrsquot get distracted by the short-term movement of the market
bull Remain on track with your long-term goals
Following a plan can help control emotions
Presenter
Presentation Notes
Why is following an investment plan important It can help you control your emotions in volatile times by13Staying focused on strategy not emotions13Keeping you from being distracted by the short-term movements of the equity market13Allowing you to remain on track with your long-term goals
17
2 Overconfidence
bull Investment Trap Relying on ldquohotrdquo investments to help boost your portfoliorsquos performance
bull Unintended Consequence Lower performance and increased risk of loss
bull How to Avoid the TrapDiversify and select investments based on research not emotions or hot tips
Note Diversification does not ensure a profit or protect against market loss
Presenter
Presentation Notes
Overconfidence is another emotion that can cause you to make potentially costly mistakes When yoursquore overconfident you may ignore key facts relying on momentum or hot tips from a friend to help boost your portfoliorsquos performance But chasing performance through overconfidence can have unintended consequences It can increase your risk of loss and potentially lower your returns over time You may avoid this investment trap by diversifying your assets and selecting investments based on research not emotions and hot tips
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
Column1
Column1
SampP 500 Index
107
Average Equity Fund Investor
47
To resize chart data range drag lower right corner of range
SampP 500 Index
Average Equity Fund Investor
10
Psychological biases combined with the emotions of investing can lead to costly mistakes
Presenter
Presentation Notes
When you combine a psychological bias like loss aversion with the emotions of investing in a volatile market it can lead to costly investment mistakes 13In fact take a look at this cycle of emotional investing chart In bull markets when prices are going up investors typically experience an upward swing in emotions going from optimism to excitement to overconfidence But while investors may be happy at the top of the market this moment actually offers the greatest risk of loss 13The old adage says ldquobuy low and sell highrdquo but many investors do just the opposite They get so excited and overconfident that they simply follow the crowd investing at the top of a bull market just in time to see their portfoliorsquos value decline 13On the other hand in a down market investors may be overcome by fear and panic selling their stocks at the marketrsquos bottom However this point in the equity market cycle actually provides investors with the greatest opportunity for gains over time13
11
Presenter
Presentation Notes
As Dr Daniel Kahneman said ldquoThe more emotional event is the less sensible people arerdquo
12
Emotions and Investing
5 potentially costly mistakes and how to avoid them
Presenter
Presentation Notes
Now letrsquos answer the question 13What are five of the most common and potentially costly mistakes that investors make and what can you do to help avoid them
13
1 Impatience
bull Investment TrapTrading more frequently to try to quickly enhance returns
bull Unintended Consequence Potential for higher trading costs more taxes and lower returns
bull How to Avoid the Trap Build and follow an investment plan that can help you stay invested
Presenter
Presentation Notes
The first is Impatience 13In bull markets some investors get impatient waiting for their investments to increase in value They try to enhance performance by trading more frequently constantly moving in and out of equities in search of higher returns While this strategy can work if you pick the right stocks or time the market correctly it can also lead to higher trading costs more taxes and lower returns A more effective and consistent approach is to build a long-term financial plan that can help you stay invested through changing markets
14
Many investors donrsquot have the patience to stay invested
How long do you think most equity fund investors have remained in their investment over the last 20 years
Source 2018 Quantitative Analysis of Investment Behavior DALBAR
Only 36 years
Presenter
Presentation Notes
[Read the question on the slide and pause before providing the answer]
15
SampP 500 Index Average Equity Fund Investor
107
47
Source 2018 Quantitative Analysis of Investment Behavior DALBAR This study utilizes data from the Investment Company Institute and Standard amp Poorrsquos to compare investor behavior with the returns of the overall equity market The Average Equity Fund Investor represents the aggregate action of all investors in equity mutual funds Investor returns are determined using the change in total equity fund assets after excluding sales redemptions and exchanges This method of calculation captures realized and unrealized capital gains dividends interest trading costs sales charges fees expenses and any other costs The SampP 500 Index is an unmanaged index of large-cap US stocks that is considered to be representative of the US equity market
Moving in and out of the market can lead to lower returns
Investor behavior contributed to a performance gap of 60 per year over 30 years
Average annual returns over 30 years(12311987 ndash 12312017)
Presenter
Presentation Notes
Letrsquos take a look at how emotions like impatience can impact your portfoliorsquos return 13In their annual study of investor behavior and its impact on portfolio returns DALBAR Inc a leading investment research firm showed that while equities performed well over the 30 years from 123187 to 123117 investorsrsquo emotional decisions to buy sell and switch in and out of the market led to annual average returns of only 47 In comparison the SampP 500 Index generated average annual returns of 107 over the 30-year period Thatrsquos a difference of 60 per year 13Of course itrsquos important to keep in mind that the investor returns reflect investment selection as well as sales charges fees expenses and transaction costs whereas the SampP 500 Index returns do not These factors also contribute to the difference in returns The SampP 500 Index is an unmanaged index in which you cannot invest directly Past performance is not a guarantee of future results13[Please review the additional disclosures on the slide]1313131313
Chart1
Column1
107
47
Sheet1
16
bull Stay focused on strategy not emotions
bull Donrsquot get distracted by the short-term movement of the market
bull Remain on track with your long-term goals
Following a plan can help control emotions
Presenter
Presentation Notes
Why is following an investment plan important It can help you control your emotions in volatile times by13Staying focused on strategy not emotions13Keeping you from being distracted by the short-term movements of the equity market13Allowing you to remain on track with your long-term goals
17
2 Overconfidence
bull Investment Trap Relying on ldquohotrdquo investments to help boost your portfoliorsquos performance
bull Unintended Consequence Lower performance and increased risk of loss
bull How to Avoid the TrapDiversify and select investments based on research not emotions or hot tips
Note Diversification does not ensure a profit or protect against market loss
Presenter
Presentation Notes
Overconfidence is another emotion that can cause you to make potentially costly mistakes When yoursquore overconfident you may ignore key facts relying on momentum or hot tips from a friend to help boost your portfoliorsquos performance But chasing performance through overconfidence can have unintended consequences It can increase your risk of loss and potentially lower your returns over time You may avoid this investment trap by diversifying your assets and selecting investments based on research not emotions and hot tips
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
Column1
Column1
SampP 500 Index
107
Average Equity Fund Investor
47
To resize chart data range drag lower right corner of range
SampP 500 Index
Average Equity Fund Investor
11
Presenter
Presentation Notes
As Dr Daniel Kahneman said ldquoThe more emotional event is the less sensible people arerdquo
12
Emotions and Investing
5 potentially costly mistakes and how to avoid them
Presenter
Presentation Notes
Now letrsquos answer the question 13What are five of the most common and potentially costly mistakes that investors make and what can you do to help avoid them
13
1 Impatience
bull Investment TrapTrading more frequently to try to quickly enhance returns
bull Unintended Consequence Potential for higher trading costs more taxes and lower returns
bull How to Avoid the Trap Build and follow an investment plan that can help you stay invested
Presenter
Presentation Notes
The first is Impatience 13In bull markets some investors get impatient waiting for their investments to increase in value They try to enhance performance by trading more frequently constantly moving in and out of equities in search of higher returns While this strategy can work if you pick the right stocks or time the market correctly it can also lead to higher trading costs more taxes and lower returns A more effective and consistent approach is to build a long-term financial plan that can help you stay invested through changing markets
14
Many investors donrsquot have the patience to stay invested
How long do you think most equity fund investors have remained in their investment over the last 20 years
Source 2018 Quantitative Analysis of Investment Behavior DALBAR
Only 36 years
Presenter
Presentation Notes
[Read the question on the slide and pause before providing the answer]
15
SampP 500 Index Average Equity Fund Investor
107
47
Source 2018 Quantitative Analysis of Investment Behavior DALBAR This study utilizes data from the Investment Company Institute and Standard amp Poorrsquos to compare investor behavior with the returns of the overall equity market The Average Equity Fund Investor represents the aggregate action of all investors in equity mutual funds Investor returns are determined using the change in total equity fund assets after excluding sales redemptions and exchanges This method of calculation captures realized and unrealized capital gains dividends interest trading costs sales charges fees expenses and any other costs The SampP 500 Index is an unmanaged index of large-cap US stocks that is considered to be representative of the US equity market
Moving in and out of the market can lead to lower returns
Investor behavior contributed to a performance gap of 60 per year over 30 years
Average annual returns over 30 years(12311987 ndash 12312017)
Presenter
Presentation Notes
Letrsquos take a look at how emotions like impatience can impact your portfoliorsquos return 13In their annual study of investor behavior and its impact on portfolio returns DALBAR Inc a leading investment research firm showed that while equities performed well over the 30 years from 123187 to 123117 investorsrsquo emotional decisions to buy sell and switch in and out of the market led to annual average returns of only 47 In comparison the SampP 500 Index generated average annual returns of 107 over the 30-year period Thatrsquos a difference of 60 per year 13Of course itrsquos important to keep in mind that the investor returns reflect investment selection as well as sales charges fees expenses and transaction costs whereas the SampP 500 Index returns do not These factors also contribute to the difference in returns The SampP 500 Index is an unmanaged index in which you cannot invest directly Past performance is not a guarantee of future results13[Please review the additional disclosures on the slide]1313131313
Chart1
Column1
107
47
Sheet1
16
bull Stay focused on strategy not emotions
bull Donrsquot get distracted by the short-term movement of the market
bull Remain on track with your long-term goals
Following a plan can help control emotions
Presenter
Presentation Notes
Why is following an investment plan important It can help you control your emotions in volatile times by13Staying focused on strategy not emotions13Keeping you from being distracted by the short-term movements of the equity market13Allowing you to remain on track with your long-term goals
17
2 Overconfidence
bull Investment Trap Relying on ldquohotrdquo investments to help boost your portfoliorsquos performance
bull Unintended Consequence Lower performance and increased risk of loss
bull How to Avoid the TrapDiversify and select investments based on research not emotions or hot tips
Note Diversification does not ensure a profit or protect against market loss
Presenter
Presentation Notes
Overconfidence is another emotion that can cause you to make potentially costly mistakes When yoursquore overconfident you may ignore key facts relying on momentum or hot tips from a friend to help boost your portfoliorsquos performance But chasing performance through overconfidence can have unintended consequences It can increase your risk of loss and potentially lower your returns over time You may avoid this investment trap by diversifying your assets and selecting investments based on research not emotions and hot tips
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
Column1
Column1
SampP 500 Index
107
Average Equity Fund Investor
47
To resize chart data range drag lower right corner of range
SampP 500 Index
Average Equity Fund Investor
12
Emotions and Investing
5 potentially costly mistakes and how to avoid them
Presenter
Presentation Notes
Now letrsquos answer the question 13What are five of the most common and potentially costly mistakes that investors make and what can you do to help avoid them
13
1 Impatience
bull Investment TrapTrading more frequently to try to quickly enhance returns
bull Unintended Consequence Potential for higher trading costs more taxes and lower returns
bull How to Avoid the Trap Build and follow an investment plan that can help you stay invested
Presenter
Presentation Notes
The first is Impatience 13In bull markets some investors get impatient waiting for their investments to increase in value They try to enhance performance by trading more frequently constantly moving in and out of equities in search of higher returns While this strategy can work if you pick the right stocks or time the market correctly it can also lead to higher trading costs more taxes and lower returns A more effective and consistent approach is to build a long-term financial plan that can help you stay invested through changing markets
14
Many investors donrsquot have the patience to stay invested
How long do you think most equity fund investors have remained in their investment over the last 20 years
Source 2018 Quantitative Analysis of Investment Behavior DALBAR
Only 36 years
Presenter
Presentation Notes
[Read the question on the slide and pause before providing the answer]
15
SampP 500 Index Average Equity Fund Investor
107
47
Source 2018 Quantitative Analysis of Investment Behavior DALBAR This study utilizes data from the Investment Company Institute and Standard amp Poorrsquos to compare investor behavior with the returns of the overall equity market The Average Equity Fund Investor represents the aggregate action of all investors in equity mutual funds Investor returns are determined using the change in total equity fund assets after excluding sales redemptions and exchanges This method of calculation captures realized and unrealized capital gains dividends interest trading costs sales charges fees expenses and any other costs The SampP 500 Index is an unmanaged index of large-cap US stocks that is considered to be representative of the US equity market
Moving in and out of the market can lead to lower returns
Investor behavior contributed to a performance gap of 60 per year over 30 years
Average annual returns over 30 years(12311987 ndash 12312017)
Presenter
Presentation Notes
Letrsquos take a look at how emotions like impatience can impact your portfoliorsquos return 13In their annual study of investor behavior and its impact on portfolio returns DALBAR Inc a leading investment research firm showed that while equities performed well over the 30 years from 123187 to 123117 investorsrsquo emotional decisions to buy sell and switch in and out of the market led to annual average returns of only 47 In comparison the SampP 500 Index generated average annual returns of 107 over the 30-year period Thatrsquos a difference of 60 per year 13Of course itrsquos important to keep in mind that the investor returns reflect investment selection as well as sales charges fees expenses and transaction costs whereas the SampP 500 Index returns do not These factors also contribute to the difference in returns The SampP 500 Index is an unmanaged index in which you cannot invest directly Past performance is not a guarantee of future results13[Please review the additional disclosures on the slide]1313131313
Chart1
Column1
107
47
Sheet1
16
bull Stay focused on strategy not emotions
bull Donrsquot get distracted by the short-term movement of the market
bull Remain on track with your long-term goals
Following a plan can help control emotions
Presenter
Presentation Notes
Why is following an investment plan important It can help you control your emotions in volatile times by13Staying focused on strategy not emotions13Keeping you from being distracted by the short-term movements of the equity market13Allowing you to remain on track with your long-term goals
17
2 Overconfidence
bull Investment Trap Relying on ldquohotrdquo investments to help boost your portfoliorsquos performance
bull Unintended Consequence Lower performance and increased risk of loss
bull How to Avoid the TrapDiversify and select investments based on research not emotions or hot tips
Note Diversification does not ensure a profit or protect against market loss
Presenter
Presentation Notes
Overconfidence is another emotion that can cause you to make potentially costly mistakes When yoursquore overconfident you may ignore key facts relying on momentum or hot tips from a friend to help boost your portfoliorsquos performance But chasing performance through overconfidence can have unintended consequences It can increase your risk of loss and potentially lower your returns over time You may avoid this investment trap by diversifying your assets and selecting investments based on research not emotions and hot tips
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
Column1
Column1
SampP 500 Index
107
Average Equity Fund Investor
47
To resize chart data range drag lower right corner of range
SampP 500 Index
Average Equity Fund Investor
13
1 Impatience
bull Investment TrapTrading more frequently to try to quickly enhance returns
bull Unintended Consequence Potential for higher trading costs more taxes and lower returns
bull How to Avoid the Trap Build and follow an investment plan that can help you stay invested
Presenter
Presentation Notes
The first is Impatience 13In bull markets some investors get impatient waiting for their investments to increase in value They try to enhance performance by trading more frequently constantly moving in and out of equities in search of higher returns While this strategy can work if you pick the right stocks or time the market correctly it can also lead to higher trading costs more taxes and lower returns A more effective and consistent approach is to build a long-term financial plan that can help you stay invested through changing markets
14
Many investors donrsquot have the patience to stay invested
How long do you think most equity fund investors have remained in their investment over the last 20 years
Source 2018 Quantitative Analysis of Investment Behavior DALBAR
Only 36 years
Presenter
Presentation Notes
[Read the question on the slide and pause before providing the answer]
15
SampP 500 Index Average Equity Fund Investor
107
47
Source 2018 Quantitative Analysis of Investment Behavior DALBAR This study utilizes data from the Investment Company Institute and Standard amp Poorrsquos to compare investor behavior with the returns of the overall equity market The Average Equity Fund Investor represents the aggregate action of all investors in equity mutual funds Investor returns are determined using the change in total equity fund assets after excluding sales redemptions and exchanges This method of calculation captures realized and unrealized capital gains dividends interest trading costs sales charges fees expenses and any other costs The SampP 500 Index is an unmanaged index of large-cap US stocks that is considered to be representative of the US equity market
Moving in and out of the market can lead to lower returns
Investor behavior contributed to a performance gap of 60 per year over 30 years
Average annual returns over 30 years(12311987 ndash 12312017)
Presenter
Presentation Notes
Letrsquos take a look at how emotions like impatience can impact your portfoliorsquos return 13In their annual study of investor behavior and its impact on portfolio returns DALBAR Inc a leading investment research firm showed that while equities performed well over the 30 years from 123187 to 123117 investorsrsquo emotional decisions to buy sell and switch in and out of the market led to annual average returns of only 47 In comparison the SampP 500 Index generated average annual returns of 107 over the 30-year period Thatrsquos a difference of 60 per year 13Of course itrsquos important to keep in mind that the investor returns reflect investment selection as well as sales charges fees expenses and transaction costs whereas the SampP 500 Index returns do not These factors also contribute to the difference in returns The SampP 500 Index is an unmanaged index in which you cannot invest directly Past performance is not a guarantee of future results13[Please review the additional disclosures on the slide]1313131313
Chart1
Column1
107
47
Sheet1
16
bull Stay focused on strategy not emotions
bull Donrsquot get distracted by the short-term movement of the market
bull Remain on track with your long-term goals
Following a plan can help control emotions
Presenter
Presentation Notes
Why is following an investment plan important It can help you control your emotions in volatile times by13Staying focused on strategy not emotions13Keeping you from being distracted by the short-term movements of the equity market13Allowing you to remain on track with your long-term goals
17
2 Overconfidence
bull Investment Trap Relying on ldquohotrdquo investments to help boost your portfoliorsquos performance
bull Unintended Consequence Lower performance and increased risk of loss
bull How to Avoid the TrapDiversify and select investments based on research not emotions or hot tips
Note Diversification does not ensure a profit or protect against market loss
Presenter
Presentation Notes
Overconfidence is another emotion that can cause you to make potentially costly mistakes When yoursquore overconfident you may ignore key facts relying on momentum or hot tips from a friend to help boost your portfoliorsquos performance But chasing performance through overconfidence can have unintended consequences It can increase your risk of loss and potentially lower your returns over time You may avoid this investment trap by diversifying your assets and selecting investments based on research not emotions and hot tips
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
Column1
Column1
SampP 500 Index
107
Average Equity Fund Investor
47
To resize chart data range drag lower right corner of range
SampP 500 Index
Average Equity Fund Investor
14
Many investors donrsquot have the patience to stay invested
How long do you think most equity fund investors have remained in their investment over the last 20 years
Source 2018 Quantitative Analysis of Investment Behavior DALBAR
Only 36 years
Presenter
Presentation Notes
[Read the question on the slide and pause before providing the answer]
15
SampP 500 Index Average Equity Fund Investor
107
47
Source 2018 Quantitative Analysis of Investment Behavior DALBAR This study utilizes data from the Investment Company Institute and Standard amp Poorrsquos to compare investor behavior with the returns of the overall equity market The Average Equity Fund Investor represents the aggregate action of all investors in equity mutual funds Investor returns are determined using the change in total equity fund assets after excluding sales redemptions and exchanges This method of calculation captures realized and unrealized capital gains dividends interest trading costs sales charges fees expenses and any other costs The SampP 500 Index is an unmanaged index of large-cap US stocks that is considered to be representative of the US equity market
Moving in and out of the market can lead to lower returns
Investor behavior contributed to a performance gap of 60 per year over 30 years
Average annual returns over 30 years(12311987 ndash 12312017)
Presenter
Presentation Notes
Letrsquos take a look at how emotions like impatience can impact your portfoliorsquos return 13In their annual study of investor behavior and its impact on portfolio returns DALBAR Inc a leading investment research firm showed that while equities performed well over the 30 years from 123187 to 123117 investorsrsquo emotional decisions to buy sell and switch in and out of the market led to annual average returns of only 47 In comparison the SampP 500 Index generated average annual returns of 107 over the 30-year period Thatrsquos a difference of 60 per year 13Of course itrsquos important to keep in mind that the investor returns reflect investment selection as well as sales charges fees expenses and transaction costs whereas the SampP 500 Index returns do not These factors also contribute to the difference in returns The SampP 500 Index is an unmanaged index in which you cannot invest directly Past performance is not a guarantee of future results13[Please review the additional disclosures on the slide]1313131313
Chart1
Column1
107
47
Sheet1
16
bull Stay focused on strategy not emotions
bull Donrsquot get distracted by the short-term movement of the market
bull Remain on track with your long-term goals
Following a plan can help control emotions
Presenter
Presentation Notes
Why is following an investment plan important It can help you control your emotions in volatile times by13Staying focused on strategy not emotions13Keeping you from being distracted by the short-term movements of the equity market13Allowing you to remain on track with your long-term goals
17
2 Overconfidence
bull Investment Trap Relying on ldquohotrdquo investments to help boost your portfoliorsquos performance
bull Unintended Consequence Lower performance and increased risk of loss
bull How to Avoid the TrapDiversify and select investments based on research not emotions or hot tips
Note Diversification does not ensure a profit or protect against market loss
Presenter
Presentation Notes
Overconfidence is another emotion that can cause you to make potentially costly mistakes When yoursquore overconfident you may ignore key facts relying on momentum or hot tips from a friend to help boost your portfoliorsquos performance But chasing performance through overconfidence can have unintended consequences It can increase your risk of loss and potentially lower your returns over time You may avoid this investment trap by diversifying your assets and selecting investments based on research not emotions and hot tips
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
Column1
Column1
SampP 500 Index
107
Average Equity Fund Investor
47
To resize chart data range drag lower right corner of range
SampP 500 Index
Average Equity Fund Investor
15
SampP 500 Index Average Equity Fund Investor
107
47
Source 2018 Quantitative Analysis of Investment Behavior DALBAR This study utilizes data from the Investment Company Institute and Standard amp Poorrsquos to compare investor behavior with the returns of the overall equity market The Average Equity Fund Investor represents the aggregate action of all investors in equity mutual funds Investor returns are determined using the change in total equity fund assets after excluding sales redemptions and exchanges This method of calculation captures realized and unrealized capital gains dividends interest trading costs sales charges fees expenses and any other costs The SampP 500 Index is an unmanaged index of large-cap US stocks that is considered to be representative of the US equity market
Moving in and out of the market can lead to lower returns
Investor behavior contributed to a performance gap of 60 per year over 30 years
Average annual returns over 30 years(12311987 ndash 12312017)
Presenter
Presentation Notes
Letrsquos take a look at how emotions like impatience can impact your portfoliorsquos return 13In their annual study of investor behavior and its impact on portfolio returns DALBAR Inc a leading investment research firm showed that while equities performed well over the 30 years from 123187 to 123117 investorsrsquo emotional decisions to buy sell and switch in and out of the market led to annual average returns of only 47 In comparison the SampP 500 Index generated average annual returns of 107 over the 30-year period Thatrsquos a difference of 60 per year 13Of course itrsquos important to keep in mind that the investor returns reflect investment selection as well as sales charges fees expenses and transaction costs whereas the SampP 500 Index returns do not These factors also contribute to the difference in returns The SampP 500 Index is an unmanaged index in which you cannot invest directly Past performance is not a guarantee of future results13[Please review the additional disclosures on the slide]1313131313
Chart1
Column1
107
47
Sheet1
16
bull Stay focused on strategy not emotions
bull Donrsquot get distracted by the short-term movement of the market
bull Remain on track with your long-term goals
Following a plan can help control emotions
Presenter
Presentation Notes
Why is following an investment plan important It can help you control your emotions in volatile times by13Staying focused on strategy not emotions13Keeping you from being distracted by the short-term movements of the equity market13Allowing you to remain on track with your long-term goals
17
2 Overconfidence
bull Investment Trap Relying on ldquohotrdquo investments to help boost your portfoliorsquos performance
bull Unintended Consequence Lower performance and increased risk of loss
bull How to Avoid the TrapDiversify and select investments based on research not emotions or hot tips
Note Diversification does not ensure a profit or protect against market loss
Presenter
Presentation Notes
Overconfidence is another emotion that can cause you to make potentially costly mistakes When yoursquore overconfident you may ignore key facts relying on momentum or hot tips from a friend to help boost your portfoliorsquos performance But chasing performance through overconfidence can have unintended consequences It can increase your risk of loss and potentially lower your returns over time You may avoid this investment trap by diversifying your assets and selecting investments based on research not emotions and hot tips
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
Column1
Column1
SampP 500 Index
107
Average Equity Fund Investor
47
To resize chart data range drag lower right corner of range
SampP 500 Index
Average Equity Fund Investor
Chart1
Column1
107
47
Sheet1
16
bull Stay focused on strategy not emotions
bull Donrsquot get distracted by the short-term movement of the market
bull Remain on track with your long-term goals
Following a plan can help control emotions
Presenter
Presentation Notes
Why is following an investment plan important It can help you control your emotions in volatile times by13Staying focused on strategy not emotions13Keeping you from being distracted by the short-term movements of the equity market13Allowing you to remain on track with your long-term goals
17
2 Overconfidence
bull Investment Trap Relying on ldquohotrdquo investments to help boost your portfoliorsquos performance
bull Unintended Consequence Lower performance and increased risk of loss
bull How to Avoid the TrapDiversify and select investments based on research not emotions or hot tips
Note Diversification does not ensure a profit or protect against market loss
Presenter
Presentation Notes
Overconfidence is another emotion that can cause you to make potentially costly mistakes When yoursquore overconfident you may ignore key facts relying on momentum or hot tips from a friend to help boost your portfoliorsquos performance But chasing performance through overconfidence can have unintended consequences It can increase your risk of loss and potentially lower your returns over time You may avoid this investment trap by diversifying your assets and selecting investments based on research not emotions and hot tips
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
Column1
Column1
SampP 500 Index
107
Average Equity Fund Investor
47
To resize chart data range drag lower right corner of range
SampP 500 Index
Average Equity Fund Investor
Sheet1
16
bull Stay focused on strategy not emotions
bull Donrsquot get distracted by the short-term movement of the market
bull Remain on track with your long-term goals
Following a plan can help control emotions
Presenter
Presentation Notes
Why is following an investment plan important It can help you control your emotions in volatile times by13Staying focused on strategy not emotions13Keeping you from being distracted by the short-term movements of the equity market13Allowing you to remain on track with your long-term goals
17
2 Overconfidence
bull Investment Trap Relying on ldquohotrdquo investments to help boost your portfoliorsquos performance
bull Unintended Consequence Lower performance and increased risk of loss
bull How to Avoid the TrapDiversify and select investments based on research not emotions or hot tips
Note Diversification does not ensure a profit or protect against market loss
Presenter
Presentation Notes
Overconfidence is another emotion that can cause you to make potentially costly mistakes When yoursquore overconfident you may ignore key facts relying on momentum or hot tips from a friend to help boost your portfoliorsquos performance But chasing performance through overconfidence can have unintended consequences It can increase your risk of loss and potentially lower your returns over time You may avoid this investment trap by diversifying your assets and selecting investments based on research not emotions and hot tips
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
Column1
Column1
SampP 500 Index
107
Average Equity Fund Investor
47
To resize chart data range drag lower right corner of range
16
bull Stay focused on strategy not emotions
bull Donrsquot get distracted by the short-term movement of the market
bull Remain on track with your long-term goals
Following a plan can help control emotions
Presenter
Presentation Notes
Why is following an investment plan important It can help you control your emotions in volatile times by13Staying focused on strategy not emotions13Keeping you from being distracted by the short-term movements of the equity market13Allowing you to remain on track with your long-term goals
17
2 Overconfidence
bull Investment Trap Relying on ldquohotrdquo investments to help boost your portfoliorsquos performance
bull Unintended Consequence Lower performance and increased risk of loss
bull How to Avoid the TrapDiversify and select investments based on research not emotions or hot tips
Note Diversification does not ensure a profit or protect against market loss
Presenter
Presentation Notes
Overconfidence is another emotion that can cause you to make potentially costly mistakes When yoursquore overconfident you may ignore key facts relying on momentum or hot tips from a friend to help boost your portfoliorsquos performance But chasing performance through overconfidence can have unintended consequences It can increase your risk of loss and potentially lower your returns over time You may avoid this investment trap by diversifying your assets and selecting investments based on research not emotions and hot tips
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
17
2 Overconfidence
bull Investment Trap Relying on ldquohotrdquo investments to help boost your portfoliorsquos performance
bull Unintended Consequence Lower performance and increased risk of loss
bull How to Avoid the TrapDiversify and select investments based on research not emotions or hot tips
Note Diversification does not ensure a profit or protect against market loss
Presenter
Presentation Notes
Overconfidence is another emotion that can cause you to make potentially costly mistakes When yoursquore overconfident you may ignore key facts relying on momentum or hot tips from a friend to help boost your portfoliorsquos performance But chasing performance through overconfidence can have unintended consequences It can increase your risk of loss and potentially lower your returns over time You may avoid this investment trap by diversifying your assets and selecting investments based on research not emotions and hot tips
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
For example from 2006-2017 the best year in terms of new money invested into
the financial markets was followed by the
worst year in terms of investment returns
Follow the crowd and you may end up buying at the top of the market right before a significant decline
Source Investment Company Institute Fact Book 2018 and 2017
Presenter
Presentation Notes
When you invest in stocks and bonds momentum can turn at any time Follow the crowd and you may end up buying at the top of the market right before a significant decline 13For example take a look at the flow of assets into mutual funds from 2006-2017 The best year in terms of new money invested in stock and bond funds was in 2007 the top of the previous bull market It was followed by the worst year with stock market returns of -37 in 2008 13Please note that stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stock and bond investments are subject to investment risk including the possible loss of principal Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 13
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
19
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Source Callan Associates 2018 Emerging Markets stocks are represented by the MSCI Emerging Markets Index Asset class rankings are based on nine indices representing different asset classes from cash to emerging market stocks Investments in non-US stocks are subject to additional risks including political and social instability differing securities regulations and accounting standards and limited public information
BEST Performing Asset Class(Ranked by annual return and year)
WORST Performing Asset Class(Ranked by annual return and year)
Emerging Markets Stocks 2012+1822
Emerging Markets Stocks 2013-260
Emerging Markets Stocks 2007+3938
Emerging Markets Stocks 2008-5333
Presenter
Presentation Notes
Herersquos another way to look at the risks of chasing performance If you make investment decisions based on last yearrsquos performance you may be in for a surprise Investments that perform well one year may not do as well the next 13For example emerging markets stocks was the top asset class performer in both 2007 and 2012 earning 1822 and 3938 respectively However in the very next years emerging market stocks dropped to the bottom of the rankings with annual returns of -260 and -5333 respectively 1313[Read the note on the slide and adding the following]13Emerging Markets stocks are represented by the MSCI Emerging Markets Index a free float-adjusted market capitalization index that is designed to measure equity market performance of 24 emerging markets13Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results 1313
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
20
Diversification can help you generate more consistent returns in any market
Annual returns for select asset classes (1998-2017)
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS The historical performance data for each index is provided to illustrate market trends Indices are unmanaged and do not represent the performance of any specific fund or investment product You cannot invest directly in the indices Indices do not include expenses fees or sales charges that are typically associated with investments and would lower performance results Equity investments are subject to market risk Stocks with lower market capitalization generally involve greater risks An investment in foreign securities may be subject to different and additional risks associated with but not limited to foreign currencies securities regulation investment disclosure commissions accounting taxes political or social instability war or expropriation Bonds and bond funds are subject to interest rate risks If held to maturity bonds can provide a fixed rate of return and a fixed principal value while bond funds will fluctuate in value and may be worth more or less than your original investment when redeemed High yield bonds are subject to greater price swings than higher-rated bonds and payment of interest and principal is not assured Source Wilshire Compass 2018
Presenter
Presentation Notes
Rather than chasing performance diversification may help you generate more consistent returns over time The gold boxes in this chart show the returns of a hypothetical diversified portfolio with assets spread evenly among nine different investment categories As you can see it generated returns that were more consistent than other asset classes over the last 20 years A diversified portfolio may also provide you with the comfort level you need to stay invested through turbulent times and to participate in the long-term growth potential of the equity market Please note that diversification does not ensure a profit or protect against market loss1313[Read the note on the slide and adding the following]1313Bonds are represented by Barclays Capital US Aggregate Bond Index This index covers a broad array of domestic fixed income securities including government corporate mortgage and asset-backed securities 13Cash is represented by Citigroup Global Markets 3 Month T-Bill Index which measures monthly return equivalents of yield averages for the last three three-month Treasury bill issues13Diversified Portfolio is composed of equal annual investments in the nine different market segments listed here Emerging Markets are represented by the MSCI Emerging Markets Index which captures large-cap and mid-cap representation across 24 emerging market countries including Brazil Chile China and Taiwan 13High-Yield Bond is represented by the Merrill Lynch High Yield Master II Index This index tracks the performance of below investment grade US dollar-denominated corporate bonds publicly issued in the US domestic market13International Stocks are represented by the MSCI EAFE Index This index includes a selection of stocks from 21 developed markets but excludes those from the US amp Canada13Large Growth is represented by the Russell 1000 Growth Index which measures the performance of the large-cap growth segment of the US equity universe It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values 13Large Value is represented by the Russell 1000 Value Index which measures the performance of the large-cap value segment of the US equity universe It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values13SampP 500 Index is one of the most commonly used benchmarks for the US equity market The 500 stocks are market-capitalization weighted and adjusted for free float They are selected by the SampP Index Committee based to be broadly representative of the US large-cap equity market 13Small Cap is represented by the Russell 2000 Index which measures the performance of the small-cap segment of the US equity universe It includes the 2000 smallest companies in the Russell 3000 Index which represents approximately 8 of the total market capitalization of the Russell 3000 Index 13
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
21
3 Fear
bull Investment Trap Waiting too long to get back into the equity market
bull Unintended Consequence Inability to capitalize fully on a potential market rebound
bull How to Avoid the TrapConsider easing back into equities with an automatic investing strategy like dollar cost averaging (DCA)
Presenter
Presentation Notes
The next emotion wersquoll discuss is fear 13In bear markets investors are often reluctant to invest in equities because of earlier losses and the fear that theyrsquoll make more costly mistakes Some delay making investment decisions and wait for definitive signs of a market recovery before moving assets back into equities 13While this approach may seem sensible at the time it can also hinder the growth potential of your investment portfolio In fact the longer you wait to invest in equities the less chance you may have to take advantage of ldquosale pricesrdquo and a potential market rebound 13One way to address your fear is to consider easing back into the equity market using an automatic investing strategy like dollar cost averaging (DCA) By making fixed regular investments DCA can help you reduce risk while increasing your exposure to the growth potential of equities 13Note Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
22
Fear may result in lost income
Returns of the Dow Jones Industrial Average for every bull market since 1900
Note Past performance is not a guarantee of future results The Dow Jones Industrial Average is an index that consists of 30 of the largest and most widely held public companies in the US Indices are unmanaged and cannot be invested in directly Data sources The Leuthold Group from the following articles Thomas Franck ldquoOn the Bull Markets Ninth Birthday Heres How It Stacks Up Against History CNBC March 8 2018 and Michael Santoli ldquoBattle-Scarred Bull Market Turns 7rdquo CNBC March 7 2016
+418Median first-year return
Median total return +857
Bull markets have historically been front-loaded Miss the first year of a rebound and you could lose out on NEARLY HALF of the average bull
marketrsquos total gains
Presenter
Presentation Notes
How much can fear impact your portfoliorsquos returns 13Research has shown that bull markets have historically been front-loaded If you miss the first year of a rebound you could lose out on NEARLY HALF of the average bull marketrsquos total gains13For example the Leuthold Group a leading investment research firm found that the Dow Jones Industrial Average generated a median return of 418 in the first year of every bull market from 1900-2017 Thatrsquos almost half of the median total gain of 857 for the 23 bull markets during this period 13Past performance is not a guarantee of future results 13
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
Chart1
Series 1
85
41
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
Median total return
Median first-year return
Sheet1
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Series 1
Median total return
85
Median first-year return
41
To resize chart data range drag lower right corner of range
23
Take the guesswork out of timing the marketDollar cost averaging (DCA) allows you to increase your exposure to the growth
potential of equities while potentially reducing the average cost of your investment
In this example more units at lower cost equals greater potential for future growth
NOTE Dollar cost averaging does not guarantee a profit or protect against a loss in declining markets Dollar cost averaging involves continuous investment in securities regardless of fluctuating price levels Before starting such a program you should consider your ability to make purchases through periods of fluctuating price levels This hypothetical illustration is for illustrative purposes only It is only intended to show how dollar cost averaging works not to reflect the performance of an actual investment
Presenter
Presentation Notes
You can reduce your fear and take the guesswork out of timing the market by using dollar cost averaging (DCA) Rather than trying to guess when todayrsquos bear market might end DCA can help you increase your exposure to the equity market through fixed regular investments over a specific period of time By investing the same amount no matter how the market is performing DCA can help reduce the average cost of your investment and potentially enhance your returns13Consider the example on this slide It compares a $40 lump-sum investment with one invested on four separate occasions for a total of $40 13When you invest in a single large purchase you increase the chance that yoursquoll lose money in a volatile market Here a $40 lump-sum investment buys four units at $10 each If the unit price decreases to less than $10 your investment value will drop 13Now take a look at what happens with DCA By investing on four separate occasions you can minimize the risk of getting into the market at the wrong time and potentially reduce your investment costs Thatrsquos because yoursquoll buy more units when the price is low and less when the price is high 13In this example unit prices fluctuated from $5 to $12 and you ended up buying 508 units at an average unit cost of $787 Thatrsquos 21 lower than the unit cost of $10 for the lump-sum investment Plus if the market goes back up yoursquoll be better positioned to take advantage of the marketrsquos growth with more units at lower cost
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
24
4 Panic
bull Investment Trap Selling equities in down markets and moving to cash for short-term safety
bull Unintended Consequence Potential shortfall in retirement income
bull How to Avoid the TrapStay calm and use history as a guide to maintaining your long-term focus
Presenter
Presentation Notes
Panic can also lead to costly investment mistakes In down markets many investors panic and sell stocks in order to move to cash and other fixed income investments 13While this move can provide you with short-term safety it can also mean less long-term growth in your portfolio and a potential shortfall in retirement income 13How can you help avoid this trap The key is to stay calm and to use history as a guide to maintaining your long-term focus
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
25
The cost of selling stocks can be highStocks have historically outperformed bonds and cash over time
In fact stocks generated at least $15 million more over the last 30 years
Note Past performance is not a guarantee of future results Stocks are represented by the SampP 500 Index bonds by the Barclays US Aggregate Bond Index and cash by the BofA Merrill Lynch US Treasury Bill 3-Month Index Stocks are subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government Bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity This example does not take into account taxes fees or expenses if shown the results would be lower Indices are unmanaged and cannot be invested in directly Source Wilshire Compass 2018
Hypothetical growth of $100000 over 30 years 123187 ndash 123117
Stocks $2109747
Bonds $636511
Cash $266052
Presenter
Presentation Notes
You should realize that the cost of selling stocks can be high While stocks can certainly drop in value over the short term theyrsquore also one of the few investments that offer the long-term growth potential necessary for investors to reach their retirement goals 13As you can see from this slide $100000 invested in stocks at the end of 1987 would have increased to $2109747 by the end of 2017mdashdespite some of the worst market downturns and recessions since the Great Depression The same amount invested in bonds and cash would have reached $636511 and $266052 respectively Thatrsquos a difference of nearly $15 million compared to bonds and over $18 million versus cash 13Keep in mind that past performance is not a guarantee of future results 1313
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Chart1
Series 1
266052
636511
2109747
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
Cash
Bonds
Stocks
Sheet1
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Series 1
Cash
266052
Bonds
636511
Stocks
2109747
To resize chart data range drag lower right corner of range
26
It can pay to stay invested in the market
Source Bloomberg and Wellington Management Company 2018 This chart is for illustrative purposes only It is based on the SampP 500 Index and is not intended to be indicative of the performance of any specific investment Indices are unmanaged An investment cannot be made directly in an index Past performance is not a guarantee of future results
The price of missing the best days of the equity market from 123197 ndash 123117
-4
-2
0
2
4
6
8
If you were fully invested for the entire period
If you missed the marketrsquos10 best days
If you missed the marketrsquos20 best days
If you missed the marketrsquos30 best days
If you missed the marketrsquos40 best days
72
35 115
-092 -28
Presenter
Presentation Notes
Herersquos another way to look at the cost of leaving the equity market By constantly moving in and out of equities investors may miss out on the marketrsquos best days and negatively impact their returns 13For example take a look at the impact of missing just the 40 best investing days over the 20-year period ended 123117 Excluding the 40 best days the SampP 500 Index generated a return of -28 compared to a return of 72 if the money were invested for the full period of time Thatrsquos a difference of 10 13Of course you should realize that past performance is not a guarantee of future results 1313
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
History has been on your side
27
Since 1926 stocks have consistently provided long-term growth through wars recessions financial crises natural disasters and more
Source Wilshire Compass 2018 Large company stocks are represented by the SampP 500 Index an unmanaged index of large-cap stocks in the US stock market Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Higher volatility and greater risk may be associated with investing in stocks of small or emerging companies This chart is for illustrative purposes only and is not representative of any specific investment Performance for any specific investment is available from your investment representative Past performance is not a guarantee of future results Indices are unmanaged you cannot invest directly in these indices
1926 2017Time
Great Depression
Korean War1970s Recession
Vietnam War
JFKAssassination
Watergate
World War II
Gulf War
Dot-Com Bubble
CorporateScandals
911
Iraq War
2008-2009Recession
Presenter
Presentation Notes
When it comes to equity investing history is also on your side 13As you can see from this graph despite war recession corporate scandal and other financial crises stocks have historically offered strong returns over time Indeed from 123125 ndash 123117 a $1 investment in large-cap stocks as represented by the SampP 500 Index would have grown to an impressive $7352 Keep in mind that past performance is not a guarantee of future results
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
28
5 Indecision
bull Investor Behavior Staying in cash to help protect your assets from market volatility
bull Unintended Consequence Loss of purchasing power over time
bull How to Avoid the TrapReview your asset allocation mix
Presenter
Presentation Notes
Finally letrsquos talk about indecision Sometimes investors stay in cash because theyrsquore not sure what else to do They feel that at the very least cash investments will help protect their assets from market volatility The problem is that cash investments wonrsquot help you offset the loss of purchasing power over time With taxes and inflation you may have a lot less than what you expect13To help avoid this trap itrsquos important to work with your financial professional to review your asset allocation mix on a regular basis He or she can help you determine the appropriate amount of assets to keep liquid in your portfolio
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Donrsquot let indecision reduce your returnsCash alone is unlikely to generate the returns necessary to
achieve your retirement goals
29
Source Morningstar 2018 Stocks are represented by the SampP 500 Index bonds by 20-Year US Government Bonds cash by 30-day US Treasury Bills and inflation by the Consumer Price Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity The data assumes reinvestment of income and does not account for transaction costs Federal income tax is calculated using the historical marginal and capital gains tax rates for a single taxpayer earning $120000 in 2015 dollars every year No state income taxes are included Indices are unmanaged and cannot be invested in directly Past performance is not a guarantee of future results
Stocks Bonds Cash
Before Taxes and Inflation After Taxes and Inflation
102
51 5534
06
-08
Real rate of return 12311925 ndash 12312017
Presenter
Presentation Notes
Itrsquos true that cash investments like Treasury Bills and money market funds can help preserve your principal and provide you with liquidity in turbulent markets 13But over time theyrsquore unlikely to generate the returns needed to offset the impact of taxes and inflation In fact after taxes and inflation cash has an average annualized return of -08 since 1926 Please note that past performance is not a guarantee of future results 13
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Chart1
Before Taxes and Inflation
After Taxes and Inflation
102
51
55
06
34
-08
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
Stocks
Stocks
Bonds
Bonds
Cash
Cash
Sheet1
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Before Taxes and Inflation
After Taxes and Inflation
Column1
Stocks
102
51
Bonds
55
06
Cash
34
-08
To resize chart data range drag lower right corner of range
30
Short Term Investment
Bucket
Intermediate Term Investment
Bucket
Long Term Investment
Bucket
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
bull Investment time horizon Less than 1 year
bull Includes assets like CDsbull Average annual return on
investment 34
bull Investment time horizon 2-5 years
bull Includes assets like bondsbull Average annual return on
investment 55
bull Investment time horizon 6+ years
bull Includes assets like stocksbull Average annual return on
investment 102
NOTE Performance is based on annualized of various investments from 12311925-12312017 Short term investments are represented by 30-day US Treasury Bills intermediate term investments by 20-Year US Government Bonds and long-term investments by the SampP 500 Index Stocks are often subject to significant price fluctuations and therefore an investor may have a gain or loss in principal when shares are sold Government bonds and Treasury Bills are subject to interest rate risk but are backed by the full faith and credit of the US government if held to maturity Individuals may not invest directly in an index Past performance is not a guarantee of future results Source Morningstar 2018
30
Presenter
Presentation Notes
The ldquo3 Buckets Modelrdquo can be used to determine if you have the right investment mix for your long-term goals and to help you make adjustments when necessary 13Herersquos how it works13Think of investing as filling three types of investment buckets 1) short-term 2) intermediate-term and 3) long-term 13Evaluate your needs and goals with these buckets in mind13Then use the buckets to determine whether or not your money is allocated appropriately for your profile13For example if yoursquore building an emergency fund or if you need money to pay for your living expenses in six months or less you may want to put this money in short-term assets like CDs and cash which can offer principal guarantees but limited historical returns of 3-4 13However if you have money that you wonrsquot use for six years or more and want to invest it for greater riskreward potential then you should consider allocating to long-term assets like stocks that have historically generated returns averaging 102 per year since 1926 13The key is to allocate your money to the ldquoright bucketsrdquo to help reach your financial goals 131313
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
31
Managing Emotions
Presenter
Presentation Notes
Letrsquos move to the final section of our presentation Managing Emotionsmdashstrategies that can help you control your emotions in a turbulent market
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
32
The keys to staying calm in a turbulent market
bull Knowledge Understand how your investments will react to different market conditions
bull Strategy Build a broadly diversified portfolio that may help you generate more consistent returns Develop an income plan that you wonrsquot outlive
bull Perspective Work with a trusted financial professional who has the expertise experience and third-party objectivity to guide you through difficult times
Presenter
Presentation Notes
What are the keys to staying calm in uncertain markets 13Knowledge Strategy and Perspective 13To help steady your emotions itrsquos important to understand how your investments will react to different market conditions Itrsquos also helpful to build a broadly diversified portfolio that offers you the opportunity to generate more consistent returns regardless of which way the market is headed and to develop an income plan that you wonrsquot outlive 13In addition itrsquos beneficial to work with a trusted financial professional who has the expertise experience and third-party objectivity to help you keep things in perspective and to guide you through difficult times Keep in mind that there may be costs associated with the products and services offered by a financial professional 13
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
33
Understanding your investments
bull Volatility and income bull Key benefitsbull Potential pitfalls
Focus on three areas
Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes
Presenter
Presentation Notes
Knowledge is power To understand your investments itrsquos important to focus on three key areas 13Volatility and Income How is your investment likely to perform in turbulent markets What is the effect on your retirement income 13Key Benefits You should have a clear idea of why yoursquore selecting an investment for your portfolio Is it for growth income protection or some other reason13Potential Benefits Before choosing an investment you should understand the risks and potential drawbacks of putting your money in this investment 13Remember the more volatile your investment the greater the range of emotions you may feel and the more likely it may be that yoursquoll make costly emotional mistakes 13In the next several slides wersquoll look at a number of different types of investments and explore how your emotions may be impacted depending on which investments you choose
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Letrsquos start with equities As you can see from this slide equities as represented by the SampP 500 Index have been fairly volatile over the last 10 years with monthly returns ranging from 11 to nearly -17 As a result of these swings yoursquore more likely to experience emotions like fear and excitement with equities than other less volatile investments Your income is also more likely to go up and down in value and the potential for you to make costly emotional mistakes during turbulent times may be higher as well 13In terms of key benefits equities offer growth potential the opportunity to diversify your portfolio and spread out risk and the possibility of dividend income depending on which stocks you choose Dividend-paying stocks may provide you with a tax advantage Qualified dividends (those that meet certain requirements) are currently taxed at the lower long-term capital gains tax rate rather than at the higher rate for an individualrsquos ordinary income 13On the downside equities offer no protection against market uncertainty Investments in stocks are subject to risk including the possible loss of principal Equities also do not offer optional income guarantees or beneficiary protection that can help you feel more financially secure in difficult times These protection features may be important to you depending on your financial goals and situation
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
35
Bonds
Key Benefitsbull Fixed ratebull Government bonds
backed by the US government
bull Certain types of bonds offer tax advantages
Potential Pitfallsbull No potential for
market growthbull No lifetime income
options
Monthly returns of the Barclays US Aggregate Bond Index(12312007-12312017)
Volatility and Income
Bonds tend to be less volatile than stocks so your emotions and income may not
Next wersquoll look at bonds As the graph on this slide shows the volatility of bond returns has been significantly lower than stocks over the last 10 years As a result the range of emotions that you feel may be smaller with these types of income investments 13In fact bonds offer several key benefits for investors who are concerned about market volatility With a fixed rate of return bonds can help protect your assets from market risk Government bonds and Treasury securities are also guaranteed by the US government as to the timely payment of principal and interest and if held to maturity offer a fixed rate of return and fixed principal value 13Certain types of bonds also offer tax advantages For example Treasury securities are exempt from state and local income taxes and municipal bondsmdashthose issued by states cities counties and other local government entitiesmdashare generally exempt from federal income taxes and sometimes from state and local taxes too Municipal bonds may be subject to the Alternative Minimum Tax (AMT) Please consult with your financial or tax advisor for more information 13However the returns from bonds may not offer the growth potential you need to keep pace with inflation With rising costs you could lose the purchasing power of your retirement dollars Plus if the market goes up you may experience regret and disappointment that you missed out on the growth opportunities 13While bonds are not impacted by market volatility directly the value of these investments will be affected by credit defaults and interest rate volatility If rates rise significantly investors may sell their bonds before maturity and lock in their losses In addition bonds donrsquot offer death benefits or optional retirement income guarantees that are available in certain annuity products for which you pay certain fees and charges These annuity guarantees are backed by the claims-paying ability of the insurer Wersquoll learn about them later in this presentation 13
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
The third category wersquoll discuss is Cash13Treasury Bills CDs and other cash investments are popular among individuals who are looking for short-term financial security or to diversify their portfolio with more conservative investments In terms of monthly yields CDs are less volatile than equities or bonds They offer a fixed rate of return if held to maturity and theyrsquore insured by the Federal Deposit Insurance Corporation (FDIC) Treasury Bills are also backed by the US government 13These investments can help you stay calm in a volatile market but they offer no potential for market growth Plus they offer no lifetime income options or beneficiary protection features both of which may be important considerations depending on your individual needs and objectives
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
37
Key Benefitsbull Growth potentialbull Diversificationbull Tax deferralbull Lifetime income optionsbull Income guaranteesbull Death benefit
Potential Pitfallsbull Higher costbull Optional income benefit
subject to additional fees restrictions and limitations
Volatility and Income
Annuities will fluctuate with the market but they can guarantee income growth for a certain
number of years even if your contract value drops to zero
Hypothetical illustration of a Variable Annuity with an Income Protection Feature
Annuities
Note This illustration is not to scale and is intended to show how a variable annuity with an optional income protection feature can work It illustrates the potential for an increased income payment in the first 12 contract years regardless of how the market performs
Presenter
Presentation Notes
Finally letrsquos discuss annuitiesmdashin particular variable and index annuities Both variable and index annuities are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company An index annuity is not a direct investment in the stock market or any index It offers you an opportunity to earn interest based in part on the performance of a specific market index You can choose from diverse index interest accounts for growth potential and a fixed interest account for a guaranteed fixed rate and principal protection All account options offer tax deferral 13Variable annuities are investment vehicles designed for retirement purposes Through variable investment portfolios you can invest in stocks bonds or cash investments like Treasury Bills so returns may vary with the performance of the underlying assets You can diversify your assets among a broad range of investment choices and benefit from tax deferral and the expertise of professional money managers 13Of course tax deferral is not unique to variable and index annuities You can also benefit from tax deferral by investing in stocks and bonds through a qualified plan such as an IRA or 401(k) However unlike stocks bonds or cash investments variable and index annuities can help protect your retirement income from market losses For an additional fee they offer living benefit riders that can guarantee your income for life and help insulate your legacy in a down market Some riders even provide lifetime income thatrsquos guaranteed to rise for a certain number of years even if your contract value drops to zero By investing in an annuity with a living benefit rider yoursquoll be comforted knowing that your retirement income can be protected for life no matter how the market performs Keep in mind that these guarantees are subject to restrictions and limitations and are backed by the claims-paying ability of the issuing insurer 13On the downside annuities can be more expensive than other similar investments With variable annuities yoursquoll pay standard costs such as mortality and expense risk charges investment management fees and withdrawal charges as well as additional costs for optional riders Riders such as the one illustrated in this slide are also subject to additional restrictions limitations and conditions Index annuities donrsquot have mortality and expense risk charges and investment management fees but they also have withdrawal charges and rider fees 13Please note that variable and index annuities generally work in two stages In the Accumulation phase they can help you grow assets on a tax-deferred basis In the Distribution phase they can provide you with a broad range of income options including annuitization (converting your contract to regular payments lasting from five years to life) at no additional cost and enhanced income options for an additional fee Withdrawals of taxable amounts are subject to ordinary income tax and if withdrawn prior to age 59frac12 an additional 10 federal tax may apply Early withdrawals may be subject to withdrawal charges13For variable annuities Investment involves risk including the possible loss of principal Your contract when redeemed may be worth more or less than the total amount invested In addition if yoursquore thinking about funding your IRA or 401(k) with an annuity you should realize that these plans are already tax deferred You should only use a qualified annuity if you want to benefit from features other than tax deferral Please talk to your financial professional for more information13
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
In addition to stocks bonds cash and annuities consider bull Mutual funds for diversification professional money
management and growth potentialbull IRAs 401(k)s and other retirement plans to help you
accumulate assets and generate retirement incomebull Life insurance to provide for your loved onesbull Long term care to help meet rising nursing home costs
38
Strategy Diversify
Note Mutual funds are subject to investment risk including the possible loss of principal Please read the prospectus for risks fees and additional information before investing
Presenter
Presentation Notes
In taking steps to control your emotions perhaps the most important strategy is to build a broadly diversified portfolio and comprehensive financial plan that address your critical investment needs and goals while helping to reduce emotional risk By spreading your assets among different vehicles like stocks bonds cash and annuities you can reduce the impact that any one investment will have on your overall portfolio and potentially generate more consistent returns And with more stability comes less emotions that can lead to big mistakes 13In addition to stocks bonds cash and annuities that wersquove already discussed you should consider adding other products to your comprehensive financial plan including 13Mutual funds for diversification professional money management and growth potential13IRAs 401(k)s and other retirement plans to help you accumulate assets and generate retirement income13Life insurance to provide for your loved ones13Long term care to help meet rising nursing home costs 1313
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Create a withdrawal strategy that can help ensure your income lasts for life
Strategy
The following allocations include short-term bonds 6040 is 60 stocks 30 bonds and 10 short-term bonds 4060 is 40 stocks 40 bonds and 20 short-term bonds and 2080 is 20 stocks 50 bonds and 30 short-term bonds
Source T Rowe Price 2017 based on Monte Carlo Analysis and a 30-year retirement The initial withdrawal amount is increased 3 annually for inflation Monte Carlo Analysis is hypothetical in nature does not reflect actual investment results and is not a guarantee of future results It is based on a number of assumptions There can be no assurance that the results shown will be achieved or sustained Results may vary and such results may be better or worse than the simulated scenario Underlying long-term expected annual returns for the asset classes are not based on historical returns Rather they represent assumptions that take into account among other things historical returns They also include T Rowe Price estimates for reinvested dividends and capital gains These assumptions as well as an assumed degree of fluctuation of returns around these long-term rates are used to generate random monthly returns for each asset class over specified time periods The monthly returns are then used to generate thousands of scenarios representing a spectrum of possible return outcomes for the modeled asset classes Success rates are based on these scenarios
Withdraw
A 4 initial withdrawal amount may no longer be safeAssuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement
Presenter
Presentation Notes
To stay calm in turbulent markets itrsquos also important to create a withdrawal strategy that can help ensure your income lasts for life As this slide shows you may run out of money if you take out too much each year In fact a prudent withdrawal rate of 4mdasha percentage that has been recommended by financial professionals in the pastmdashmay no longer be safe in todayrsquos market 13As you can see from this slide assuming 4 annual withdrawals from a portfolio of 60 stocks and 40 bonds therersquos a 20 chance that your income will fail to last a 30-year retirement 13[Review the information on the slide and note the following]13This slide shows the probability that your income may last over a 30-year retirement based on various withdrawal rates and different percentages of stocks and bonds Other factors that may affect the longevity of assets include the investment mix taxes expenses related to investing and the number of years of retirement funding (life expectancy)13The projections or other information generated by T Rowe Price regarding the likelihood of various investment outcomes are hypothetical in nature do not reflect actual investment results and are not guarantees of future results 13A probabilistic approach is used to determine the likelihood that you may be able to achieve the goal of the stated withdrawal rate Probabilistic (Monte Carlo) modeling is a statistical modeling technique in which a set of future outcomes is forecasted based on the variability or randomness associated with historical occurrences It involves generating thousands of scenarios each simulating the growth of assets over a specified period of time taking into account a variety of factors such as economic conditions the allocation of assets portfolio value net cash flow and market volatility 13This analysis is not a guarantee prediction or projection of any particular result and your actual results may vary materially Rather this analysis is directional in nature and can be used to help you evaluate how certain decisions or strategies may impact your ability to achieve your goals 13
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Strategy Guarantee
By allocating a portion of your retirement assets to an annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Fees restrictions and other limitations apply
40
Withdrawal amounts are calculated as a stated percentage (generally 2 to 7 though rates above 5 are typically available only if withdrawals begin at age 70 or later) of a shadow account known variously as the benefit base income base or income account Source 2018 IRI Fact Book Insured Retirement Institute
Presenter
Presentation Notes
If you want to ensure that your income will last and you need to withdraw more than 3-4 per year you may want to consider adding a variable or index annuity with a living benefit rider for more guaranteed income for life 13By allocating a portion of your retirement assets to a variable or index annuity with a living benefit rider you can guarantee lifetime withdrawals of 2-7 per year depending on the product and rider you select Please keep in mind that a living benefit rider is generally available for an annual fee A living benefit rider guarantees that a certain percentage (typically 2 to 7) can be withdrawn annually for life often based on age Other restrictions and limitations apply Keep in mind that annuities may not be suitable for all individuals and may only be appropriate for a portion of your retirement assets Please discuss your specific situation with your financial professional Also refer to the variable annuity prospectus or the index annuity owner acknowledgment and disclosure statement for details
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Gain a new perspective on retirement income planning
Checklist for finding the right financial professional
Presenter
Presentation Notes
The third key to staying calm in volatile times is to work with a financial professional or insurance agent How can you find the right professional for your individual situation 13Here are some questions to ask yourself 13Does this person have the knowledge experience and expertise Irsquom looking for 13Is heshe responsive to my needs13Can I get a hold of himher when I need to 13Has heshe been referred to me by someone I trust
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
42
A good financial professional can help you navigate the ups and downs of investing
Presenter
Presentation Notes
A good financial professional can help you navigate the ups and downs of investing In good times he or she can help you overcome emotions like overconfidence and impatience and build an investment strategy with the right balance of risk and reward potential When times are bad he or she can also help you stay focused on long-term goals rather than short-term returns
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
43
Presenter
Presentation Notes
So letrsquos work together to create a customized strategy that can help smooth out your emotions in todayrsquos uncertain market If yoursquore interested you may want to consider scheduling a time for a FREE portfolio review I can help you evaluate your current portfolio and work with you to take the emotions out of your financial plan
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
Thank you for attending
Thank you for attending
Annuities are issued by American General Life Insurance Company (AGL) Houston TX except in New York where they are issued by The United States Life Insurance Company in the City of New York (US Life) Variable annuities are distributed by AIG Capital Services Inc (ACS) Member FINRA 21650 Oxnard Street Suite 750 Woodland Hills CA 91367-4997 1-800-445-7862 AIG Funds are advised by SunAmerica Asset Management LLC (SAAMCo) and distributed by AIG Capital Services Inc Member FINRA Harborside 5 185 Hudson Street Suite 3300 Jersey City NJ 07311 800-858-8850 AGL US Life SAAMCo and ACS are members of American International Group Inc (AIG)Annuities are long-term products designed for retirement Early withdrawals may be subject to withdrawal charges Withdrawals of taxable amounts are subject to ordinary income tax and if taken prior to age 59frac12 an additional 10 federal tax may apply Tax-qualified plans such as IRAs and 401(k)s are tax-deferred (and subject to required minimum distributions) regardless of whether or not they are funded with an annuity Products and features may vary by state and may not be available in all states Index annuities are not a direct investment in the stock market They are long-term insurance products with guarantees backed by the claims-paying ability of the issuing insurance company They provide the potential for interest to be credited based in part on the performance of the specified index without the risk of loss of premium due to market downturns or fluctuations Index annuities may not be suitable or appropriate for all individuals An investment in a variable annuity involves investment risk including possible loss of principal The contract when redeemed may be worth more or less than the total amount invested The purchase of a variable annuity is not required for and is not a term of the provision of any banking service or activityThis information is general in nature may be subject to change and does not constitute legal tax or accounting advice from any company its employees financial professionals or other representatives Applicable laws and regulations are complex and subject to change Any tax statements in this material are not intended to suggest the avoidance of US federal state or local tax penalties For advice concerning your individual circumstances and tax statements made in this material you should consult a attorney tax advisor or accountant
Variable annuities and mutual funds are sold by prospectus only Please read the prospectus carefully before investing The prospectus contains
the investment objectives risks fees charges expenses and other information regarding the fund or the contract and underlying funds
which should be considered carefully before investing
Not FDIC or NCUANCUSIF InsuredMay Lose Value No Bank or Credit Union Guarantee Not a Deposit
Not Insured by Any Federal Government AgencyM4882PP31 (219)
44
Presenter
Presentation Notes
Please also see me to pick up a product prospectus Variable annuities are sold by prospectus only The prospectus contains the investment objectives risks fees charges expenses and other information regarding the contract and underlying funds which should be considered carefully before investing You should read the prospectus carefully before investing13Thank you for your time and let me help you take the emotions out of your financial plan 13[Read disclosures in the rest of the slide]13
Emotions and Your Money
Understanding Emotions
Many psychologists believe that people are ldquohard-wiredrdquo to make irrational emotional decisions
Slide Number 4
Letrsquos put this bias to the test
Slide Number 6
Slide Number 7
Surprising results
Surprising results
Psychological biases combined with the emotions of investing can lead to costly mistakes
Slide Number 11
Emotions and Investing
1 Impatience
Many investors donrsquot have the patience to stay invested
Moving in and out of the market can lead to lower returns
Following a plan can help control emotions
2 Overconfidence
Momentum can turn at any time
What a difference a year makesmdashLast yearrsquos winner may be this yearrsquos loser
Diversification can help you generate more consistent returns in any market
3 Fear
Fear may result in lost income
Take the guesswork out of timing the market
4 Panic
The cost of selling stocks can be high
It can pay to stay invested in the market
History has been on your side
5 Indecision
Donrsquot let indecision reduce your returns
Consider using the ldquo3 Bucketsrdquo model to help determine the right asset allocation for you
Managing Emotions
The keys to staying calm in a turbulent market
Understanding your investments
Stocks
Bonds
Cash
Slide Number 37
Build a broadly diversified portfolio and comprehensive financial plan that address critical needs and goals while helping to reduce emotional risk
Create a withdrawal strategy that can help ensure your income lasts for life
Consider a variable or index annuity with a living benefit rider for more guaranteed income for life
Slide Number 41
A good financial professional can help you navigate the ups and downs of investing
Letrsquos work together to create a customized accumulation and income strategy that can help smooth out your emotions in todayrsquos uncertain market
