Transcript Slide 1

The Roadmap to
Retirement
Mile marker conversations to consider
[When presenting in AR, CA, OK, TX or IL, use the phrase “Insurance Sales
Presentation.” In CA and AR, add License Number]
Annuities are issued by The Prudential Insurance Company of America, Newark, NJ.
0244322-00001-00 Ed. 04/2013
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[Optional Disclosure Slide]
Investments are offered through [broker dealer name], a registered
broker dealer (member FINRA/SIPC). Insurance is offered through
[agency name].
[Broker dealer name] and [agency name], located at [address], are not
affiliated with Prudential Financial.
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[For Allstate Financial Services only: This slide must be shown prior
to the beginning of the customer presentation]
[Hosted/Presented by:]
[PFR Name]
Personal Financial Representative
[Allstate Financial Services, LLC or LSA Securities
(in LA & PA)]
Securities offered by Personal Financial Representatives through Allstate Financial Services, LLC (LSA Securities in LA and PA). Registered
Broker-Dealer. Member FINRA, SIPC. Main Office: 2920 South 84th Street, Lincoln, NE 68506. (877) 525-5727.
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[OPTIONAL SLIDE FOR MERRILL LYNCH
EVENTS ONLY]
Bank of America Corporation (“Bank of America”) is a financial holding company that, through its subsidiaries and affiliated
companies, provides banking and investment products and other financial services.
Merrill Lynch, Pierce, Fenner & Smith Incorporated is a wholly-owned subsidiary of Bank of America Corporation, and a registered
broker-dealer and member of FINRA and SIPC.
Investment products offered through MLPF&S and insurance and annuity products offered through Merrill Lynch Life Agency Inc.:
Are Not FDIC Insured
May Lose Value
Are Not Bank Guaranteed
Are not Insured by Any Federal
Government Agency
Are Not Deposits
Are Not a Condition to Any Banking
Service or Activity
Merrill Lynch Life Agency Inc. is a licensed insurance agency and a wholly owned subsidiary of Bank of America Corporation.
The views and opinions expressed in this presentation are not necessarily those of Bank of America Corporation; Merrill Lynch,
Pierce, Fenner & Smith Incorporated; or any affiliates.
Nothing discussed or suggested in these materials should be construed as permission to supersede or circumvent any Bank of
America, Merrill Lynch, Pierce, Fenner & Smith Incorporated policies, procedures, rules, and guidelines.
The benefit payment obligations arising under the annuity contract guarantees, rider guarantees, or optional benefits and any fixed
account crediting rates or annuity payout rates are backed by the claims-paying ability of the issuing insurance company. Those
payments and the responsibility to make them are not the obligations of the third party broker/dealer from which this annuity is
purchased or any of its affiliates. They are also not obligations of any affiliates of the issuing insurance company. None of them
guarantees the claims-paying ability of the issuing insurance company.
All guarantees, including optional benefits, do not apply to the underlying investment options.
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The retirement journey
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Accumulation
Asset allocation
Consolidation
Tax diversification
Protection
Longevity
Healthcare costs
Medicare
 Retirement income
planning
 Social Security planning
 Required Minimum
Distributions
 Wealth transfer
This guide presents a general overview and the ideas presented
are not individualized for your particular situation. This information
is based on current law which can be changed at any time.
Prudential Annuities does not provide tax, accounting, or legal
advice. Please consult your own attorney or accountant.
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Agenda
Mile marker conversations
to have in your
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40s
50s
60s
70s
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Mile marker
conversations
prior to age 50
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Prior to age 50
 Review asset allocation
 Review retirement strategy
 Help map out your course
Asset allocation does not ensure a profit or protect against a loss.
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Mile marker
conversations in
your 50s
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Age 50
 Consider maxing out contributions
 Consider taking advantage of “catch-up”
contributions
 Review healthcare and long-term care costs
 Conduct beneficiary audit
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Review healthcare and
long-term care costs
 40% of those in retirement spend
more on healthcare than
expected*
 70% of those turning 65 will need
some type of long-term care
services during their lifetime**
*Source: Employee Benefits Research Institute (EBRI), 2011 Retirement Confidence Survey
** Source: National Clearinghouse for Long Term Care Information, U.S. Department of
Health & Human Services, January 2012
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Beneficiary reviews
Retirement assets account for 42% of the wealth for
Americans with at least $100,000 of investable assets*
 Understand that wills only cover probate assets
 Review beneficiary designations after life changing events
 Consider the dangers of naming trusts as beneficiary of
retirement accounts
*Wells Fargo Retirement, December 2011
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Age 55
Penalty-free withdrawals from
retirement plans
 Does not apply to IRAs
Early retirement and
Social Security
 Benefits based on best 35 years
of earnings
Early pension elections and
Social Security integration
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Age 59½
 Penalty-free withdrawals
 In-service withdrawals
• Age 59½
• Prior rollover assets
• After-tax contributions
• Employer contributions
• Five years of service
 Summary Plan Description (SPD)
Please consult your tax advisor before taking an in-service withdrawal.
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Consider reasons to roll to an IRA
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No plan-imposed restrictions
Estate planning
No mandatory 20% withholding on withdrawals
Control and greater investment selection
Access to products providing guaranteed
retirement income
All guarantees, including optional benefits, are backed by the claims-paying ability of the issuing company and do not apply to the
underlying investment options.
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Consider reasons to not roll
to an IRA
 Early access to retirement assets
• Retired at or after age 55
 Delayed distributions
• Age 70½ and still working
 Net Unrealized Appreciation (NUA) tax treatment
 ERISA credit protection
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Roth conversions
 Tax diversification in retirement
 Hedge against increasing tax rates
 No Required Minimum Distributions (RMDs)
 Estate planning benefits
Conversions to a Roth IRA are generally fully taxable. Before you convert to a Roth IRA, consider how your tax bracket will affect the overall
benefit of the rollover. Conversion income may push you into a higher tax bracket. It is, however, possible to convert only part of their traditional
IRA. This could enable you to remain in the same tax bracket you would be in without the conversion. It is generally advisable to pay the taxes on
the conversion with funds other than those in your traditional IRA. If you are under age 59½ when you do a conversion, any funds not deposited
in the Roth IRA will be subject to the 10% federal income tax penalty (unless an exception applies).
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Mile marker
conversations in
your 60s
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Age 62
Impact of taking Social Security benefits early
Age
Full Retirement Age 66
Benefits at age 62: $18,000 per year
62
25% reduction
63
20% reduction
64
13.3% reduction
Benefit At 66: $24,000 per year
65
6.7% reduction
Lives to age 92: $1,099,657 lifetime total
66
full benefits
Lives to age 92: $900,048 lifetime total
Source: http://www.socialsecurity.gov/OACT/ProgData/ar_drc.html, as of 03/2013
Assume $2,000 monthly Social Security benefit at Full Retirement Age and 3% COLA
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Age 65
Evaluate Medicare options
 Enrollment begins at age 65
 Working past age 65?
• Consider signing up for Part A Hospital coverage - Usually free
• Part B Doctor visit coverage - At least $100 per month
– Must enroll 8 Months from last month of work, otherwise:
» Coverage may be delayed for 3 to 15 months
» 10% premium penalty for every 12 months of delay
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Create a plan to help transition savings
to retirement income
What accounts to tap into first
 Taxable, Tax-deferred, Tax-free
Consider the following risks to income
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Market volatility
Low interest rates
Inflation
Higher taxes
Cost of living
Sequence of returns
Longevity
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Longevity risk
Expected life span of individuals and couples age 65*
*
Source: U.S. Annuity 2000 Mortality table, Society of Actuaries
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Longevity risk
 Longevity risk demands “sustainable” withdrawal
rates
 One financial author has stated:
“2% is bulletproof, 3% is probably safe, 4% is pushing it,
and, at 5% you’re eating Alpo in your old age.”
-William Bernstein, Author of The Four Pillars of Investing (2010)
 Required Minimum Distributions (RMDs) may
eventually require a higher rate of withdrawal
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RMDs and sustainable withdrawals
RMDs increase each year*
Age
Withdrawal Rate
70½
3.6%
75
4.4%
80
5.4%
85
6.8%
90
8.8%
Source: IRS Publication 590, Section III
*If the spouse is the sole beneficiary and is more than 10 years younger, the RMD rate is lower.
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RMDs and sustainable withdrawals
The market doesn’t care that you have an RMD
Age
Value
Market
Return
% of Value
RMD
End Value
70
$1,000,000
-10%
3.6%
$36,496
$863,504
71
$863,504
-13%
3.7%
$32,585
$718,663
72
$718,663
-23%
3.9%
$28,073
$525,298
 Total withdrawals: $97,154
 Average market return: -15%
 Value: -47%
This is a hypothetical example for illustrative purposes
only. It does not reflect a specific product, an actual
account value or the performance of any investment.
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Ages 66-70
Impact of taking Social Security benefits later
Age
Full Retirement Age 66
67
8% increase
68
16% increase
69
24% increase
70
32% increase
Benefit At 66: $24,000 per year
Lives to age 92: $1,099,657 lifetime total
Benefit at age 70: $31,680 per year
Lives to age 92: $1,302,375 lifetime total
Source: www.socialsecurity.gov/OACT/ProgData/ar_drc.html, as of 03/2013
Assume $2,000 monthly Social Security benefit at Full Retirement Age and 3% COLA
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Are you receiving the
most from Social Security?
Spousal benefits
Married individuals can receive the greater of own benefits or
“spousal benefits”
 Spousal benefit is up to 50% of their spouse’s Social Security benefit
 Cannot claim spousal benefit until the spouse files for benefits
Survivor benefits
 Surviving spouse entitled to receive the greater of own benefits or deceased
spouse’s benefits
 Early benefit election = reduced survivor benefits
 90% of men take Social Security benefits early*
*Source: Center for Retirement Research at Boston College, March 2010
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Social Security strategies:
File and Suspend
File at Full Retirement Age
Matt files at 66
 Receives $2,000 per month
Jen files at 66
 Receives a spousal benefit of $1,000 per month
This is a hypothetical example for illustrative purposes only.
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Social Security strategies:
File and Suspend
Matt Files & Suspends
Matt files at 66,
suspends benefits until age 70
 At age 70 receives $2,640 per month
Jen files at 66
 Receives a spousal benefit $1,000 per month
This is a hypothetical example for illustrative purposes only.
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Social Security
maximization strategies
Matt lives until age 85 and Jen lives to age 92
Both Claim at 62
 $414,000 in his benefits
 $193,200 in spousal benefits
 $126,000 in survivor benefit
Total Payout: $733,200
Both Claim at 66
 $456,000 in his benefits
 $228,000 in spousal benefits
 $168,000 in survivor benefit
Total Payout: $852,000
Matt Files & Suspends
 $475,200 in his benefits
 $228,000 in spousal benefits
 $221,760 in survivor benefit
Total Payout: $924,960
This is a hypothetical example for illustrative purposes only.
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Mile marker
conversations in
your 70s
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Required Minimum Distributions
(RMDs)
 IRS Form 5498
 50% penalty of RMD shortfall
 Special rules for 5% business owners
 RMDs and sustainable withdrawals
 Aggregation rules
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Mile marker conversation summary
 The road to and through retirement can be
challenging to navigate at times
 There are important mile makers along the way
that can help make your road to retirement a
smoother one
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What’s next?
Set up an appointment today to have
your mile marker conversations
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Disclosures
In-service withdrawals can be very appropriate for many individuals. There are, however, some factors
to consider:
•
Exceptions to the 10% federal income tax penalty - The penalty exceptions for employer plan and IRA
distributions are not identical. Two exceptions apply to an employer plan, but do not apply to an IRA:
separation from service at or after age 55 and qualified domestic relations orders. On the other hand, IRAs
provide penalty exceptions for first-time home purchase and higher education, but employer plans do not.
•
Net Unrealized Appreciation (NUA) tax treatment - Favorable NUA tax treatment is not available to IRAs.
Therefore, if an individual has highly appreciated company stock in his employer-sponsored plan, rolling that
stock to an IRA eliminates the ability to take advantage of NUA tax treatment.
•
Creditor protection — While IRAs now have federal bankruptcy protection, they are not protected from other
judgments the way that federal law (specifically ERISA) protects qualified plans.
•
New contributions to the employer plan - Taking an in-service distribution may affect a client’s ability to
make future contributions to the employer plan
•
Loans - In the event that a 401(k) is terminated, the loan may be subject to income taxes and a federal
income tax penalty.
•
Fees - It is important to point out that you should check with your employer to see if they offer in-service
withdrawals. Sources of information include your Plan Administrator, Summary Plan Description or
Participant Statement. Please consult these sources for any possible restrictions, fees and expenses.
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Disclosures
This material was prepared to support the marketing of annuities. Prudential, its affiliates, its distributors and their
respective representatives do not provide tax, accounting or legal advice. Any tax statements contained herein were not
intended to be used for the purpose of avoiding U.S. federal, state or local tax penalties. Please consult your own
independent advisor as to any tax or legal statements made herein.
This material is provided for educational purposes only and does not constitute investment advice. The information
contained herein is based on current tax laws, which may change in the future. Prudential Companies cannot be held
responsible for any direct or incidental loss resulting from applying any of the information provided or from any other
source mentioned. The information does not constitute any legal, tax or accounting advice. Please consult with a
qualified professional for this type of advice.
© 2013. Prudential Annuities, Prudential, the Prudential logo, the Rock symbol, Bring Your Challenges, and The
Retirement Red Zone are service marks of Prudential Financial, Inc. and its related entities, registered in many
jurisdictions worldwide.
ORD206825 [WO# 563802]
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