Transcript Asset protection in retirement

2625 Butterfield Rd., Suite 224S
Oak Brook, Illinois 60523
630-954-3444
Thomas J. Murphy, CLU
Patty Tipton, CLU
Lifestyle Expenses Income Sources
Typically 60-70%
of retirement
income
Typically 30-40%
of retirement
income
Essential
Housing
Medical
Long Term Care
Food
Lifetime Payments
Pension Plan
Social Security
Annuity Income
Discretionary
Travel
Entertainment
Pursuits
Other Assets
401(k)
IRA
Taxable Investments
Reliable
Consistent
Protected
Flexible
Market exposure
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Will your essential expenses be covered by
income sources that are reliable, consistent and
protected?
Or, will you need to tap into investments that
have more flexibility and exposure to market
volatility?
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Safety
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Accessibility
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Taxation
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Outliving your income
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Locking in interest credits
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Probate Costs
9/29 to 6/32
7/33 to 3/35
3/37 to 3/38
11/38 to 4/42
5/46 to 3/48
8/56 to 10/57
12/61 to 6/62
2/66 to 10/66
11/68 to 5/70
1/73 to 10/74
11/80 to 8/82
8/87 to 12/87
7/90 to 10/90
1/00 to 10/02
11/07 to 2/09
0.00%
86.70%
33.90%
54.50%
45.80%
28.10%
21.60%
28%
22.20%
36.10%
48.20%
27.10%
33.50%
21.90%
47%
50.90%
20.00%
40.00%
60.00%
80.00%
100.00%
Loss
Gain Required
Average bear market decline
-38%
+61%
Last bear market decline
-50.9%
+92%
What is Warren Buffet’s #1 rule for investing?
Don’t go backwards
How about rule #2?
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It consists of 500 companies that are listed on
the New York Stock Exchange, American Stock
Exchange and NASDAQ
Recognized since 1923, as the preferred
benchmark of the U.S. stock market and the
U.S. economy
The S&P 500 Index is simply a representative
number indicating the movement of the 500
companies that make up the index
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Only 19% of all actively managed funds, with
managers whose job it is to pick winning
stocks, beat the S&P in 2006
Out of more than 8,000 mutual funds, Manu’s
Daftary Quaker Strategic Growth Fund, is the
only one that has out-performed the S&P 500
for the past eight calendar years
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As the stock bubble was bursting in 2000 - 95%
of all stocks in the S&P 500 had no sell
recommendation
“The idea that any individual can beat the
market is extraordinarily unlikely. Yet the
market is full of people who think they can and
full of other people who believe them. This is
one of the great mysteries of finance. Why do
people believe they can do the impossible? And
why do other people believe them?
Do I invest in Wall Street for greater upside
potential and take the risk of market
downturns?
OR
Do I invest for a high degree of safety to avoid
losses and miss out on market gains?
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Principal is always protected from market risk
Interest earnings are based on a percentage of
the upward movement of an index such as the
S&P 500 while providing a minimum
guaranteed return
Annual gains are “locked in” and can never be
lost due to future market declines
In other words We win by not losing
$160,000
$150,000
$140,000
$130,000
S&P 500
$120,000
Index linked
$110,000
$100,000
$90,000
$80,000
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Safety
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Accessibility
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Taxation
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Outliving your income
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Locking in interest credits
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Probate Costs
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Competitive yield with guarantees
Diversification
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Never lose money due to market downturn
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Fixed Interest Rate
Bond Indexed – Linked
Equity Indexed – Linked
Automatically locks in gains
No Upfront sales charges
Some offer a bonus on all new money for five years or
longer
Only insurance companies have regulatory reserve
requirements with conservative portfolios and high
liquidity to meet contract owners’ needs
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Annuities have guaranteed, penalty-free
withdrawal options that allow you to access a
portion of your money without paying any
penalties or charges
In the event you are confined to a nursing
home, you have access to a larger portion of
your money, penalty-free
A guaranteed lifetime income access to money
in case of emergencies is preserved
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How annuities really work
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Earnings compound on top of principal
Earnings compound on top of earnings
And earnings compound on top of the dollars that
you normally send to the government in taxes
You do not pay taxes on your annuity’s growth
until you take it out
We are living longer . . .
Year
Life Expectancy
1850
39
1900
47
2006
77.9
In 2000, there were 50,000 people age 100 years or
older. In the year 2010 there were over 131,000
people age 100 or older!
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You need two guarantees for your
retirement income:
Income that remains constant even when
interest rates decline
Income for your entire life, no matter
how long you live
Client Age – 60
Initial Premium - $110,000 (Incl. Bonus of 10%)
Client Age
Accumulation Account
Value
Guaranteed Interest
Rate
60
$110,000
8.00%
61
$118,800
8.00%
62
$128,304
8.00%
63
$138,568
8.00%
64
$149,654
8.00%
65
$161,626
8.00%
66
$174,556
8.00%
67
$188,521
8.00%
68
$203,602
8.00%
69
$219,891
8.00%
70
$237,482
Guaranteed Rate – 8% Compound
Guaranteed
Payout Percentage
Guaranteed Lifetime
Income Benefit
5.25%
$12,468
75
$12,468
80
$12,468
85
$12,468
90
$12,468
95
$12,468
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An annuity, with a properly designated
beneficiary, may bypass the probate process
and may avoid probate administrative costs,
fee, delays and publicity
Therefore, at your death, more of your money
goes to the family members you choose.
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Risk of inflation and taxation eroding
retirement savings
Risk of market downturns depleting needed
assets and income
Risk of outliving your money
Risk of long-term care
WHY IS
PLANNING
IMPORTANT?
Needing long
term care places
an enormous
emotional and
physical strain on
loved ones and
family members.
That’s why
having a plan is
so important.
Estimated Years of LTC Needed
After Age 65
2-5 Years
31%
20%
More than 5
Years
1 Year or Less
20%
17%
12%
1-2 Years
None
The U.S. Government reports that 70% of people
who reach age 65 will require long-term care
services at some point in their lives.
Your long-term care planning today must prepare
for future costs. Double the costs for a couple.
1 Year of
Care
3 Years of
Care
5 Years of
Care
Cost Today
$ 73,000
$225,570
$387,500
In 10 Years
$ 98,100
$303,200
$520,800
In 20 Years
$131,850
$407,500
$700,000
You will never be younger or healthier than you are
today. That’s the reason to start planning now when
you have the most options.
When Individuals Apply: New Coverage by Age
Under 54
Age 55 – 64
26.5%
54%
Age 65+
19.5%
Applicants Rejected for Unacceptable Health
Ages 50-59
14%
Ages 60-69
23%
Ages 70-79
45%
Ages 80+
80%
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Where do I ultimately want to receive care – at
home, in an assisted living community, or a
nursing home?
What does care cost where I live – now or
where I plan to retire?
What discounts do I qualify for?
Does my employer offer a long term care
insurance benefit?
Your Real Risks After Reaching
Age 65, Men (M) – Women (W)
M
2.2%
W
2.6%
Major House Fire
M
15.5%
W
18.0%
Severe Car Accident
M
44.0%
W
72.0%
Needing Long-Term Care
Women are often impacted as providers of care for
spouse and, ultimately, as recipients of care.
Planning is especially important for women living
alone.
Women Benefit More From LTC Insurance
Single Women
Single Men
Married Women
Married Men
41%
12%
24%
22%
67% of all long-term care insurance benefits are paid for care received
by women.
Very little because it is restricted largely to
specific illnesses and injuries for short periods
of time.
MEDICAID is a joint federal and state program
for those with low income and financial
resources and only pays after you have
depleted your personal assets.
The two largest claims to date have
exceeded $1 million. In 2010, the 10
largest LTC insurers paid over $10.8
million daily to 135,000
policyholders
Yes. Most long-term care insurance policies
today enable you to receive qualifying
care in your own home and that’s one of
the reasons to consider coverage.
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Find out costs for care where you live or hope
to retire
Be sure your coverage includes an inflation
growth option so your pool of benefits
increases each year
Ask about a “shared care” option that enables
couples to link their policies in order to share
benefits in the event one person’s benefits are
exhausted
New Sales By Benefit Period
2 Years or Less 8.5%
3 Years
29.5%
4 Years
18.5%
5 Years
22.0%
6-10 Years
Lifetime
12.0%
9.5%
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Speak with a professional who specializes in
this area
Find out what coverage costs
See if you can qualify
Ask what discounts you qualify for
There is never a cost or obligation when you
request this information
Congratulations to Dr. Flores
Enjoy the weekend and the Induction Ball!
Oak Brook Benefit Resources
Tom Murphy, CLU
Patty Tipton, CLU
630-954-3444
630-817-7041