Powerful Language andSimple Solutions for Retirement

Tom Hegna CLU, ChFC, CASLFirst Vice President

New York Life Insurance Company

00411996 Exp. 12/31/10

…Retirement used

to be a promise.

Whatever happened to Happily Ever After?

78 million Baby Boomers…are racing headlong &

headstrong into retirement

Longevity –Conventional Wisdom #1

• Spend 18.1 years in retirement*• Average life expectancy:

•65 year old male, live to 85**•65 year old female, live to 88**

Sources: *Employee Benefit Research Institute (EBRI), 2004 ** Annuity 2000 Mortality Table, Society of Actuaries

Half of us will outlive our own life expectancy!

93

Longevity –Real Life Expectancy

Source: Annuity 2000 Mortality Tables

0%

25%

50%

75%

100%

65 70 75 80 85 90 95 100 105

MaleFemaleAt least one spouse

Age

78 81 86

85 88 92

91 97

Pro

babi

lity

Probability of a 65-year-old living to various ages

50% chance

25% chance

5% chance

26 Years!

People know how much money they have.

They don’t have a good idea what they can expect from that money.

Lifetime Income –Conventional Wisdom #2

SHAKE THE LADDERSHAKE THE LADDER

When you start taking money out of a portfolio, average returns are not

important!!!

Monte Carlo Simulations

Impact of Randomness50% Large Cap Stocks / 50% Intermediate Bonds

Source: NYLIMHypothetical value of $100,000 portfolio: 50% large company stocks, 50% intermediate-term bonds, assuming two investment returns from 1973 – 1995, then in reverse from 1995 – 1973. Assumes reinvestment of income and no transaction costs or taxes. This is for illustrative purposes only, and is not indicative of any investment. Past performance is no guarantee of future results. Stocks—Standard & Poor’s 500®, which is an unmanaged group of securities and is considered to be representative of the stock market in general; Bonds—5-year U.S. Government Bond; Inflation—Consumer Price Index.

$0

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

$700,000

$800,000

$900,000

$1,000,000

$1,100,000

$1,200,000

Yea

r 1

Yea

r 2

Yea

r 3

Yea

r 4

Yea

r 5

Yea

r 6

Yea

r 7

Yea

r 8

Yea

r 9

Yea

r 10

Yea

r 11

Yea

r 12

Yea

r 13

Yea

r 14

Yea

r 15

Yea

r 16

Yea

r 17

Yea

r 18

Yea

r 19

Yea

r 20

Yea

r 21

Yea

r 22

Yea

r 23

~10.1% Annualized

Return Over

22 Years

Jan. 1, 1973 – Jan 1, 1995 = $846,443Jan. 1, 1995 – Jan 1, 1973 = $831,107

Impact of Randomness Adding Systematic Withdrawal Payments

Same 50%/50% portfolio; withdraw $5,000 a year (adjusted for inflation)

Source: NYLIMHypothetical value of $100,000 portfolio: 50% large company stocks, 50% intermediate-term bonds, assuming two investment returns from 1973 – 1995, then in reverse from 1995 – 1973. Assumes reinvestment of income and no transaction costs or taxes. Withdrawal of $5,000 per year assumes the then current rate of inflation. This is for illustrative purposes only, and is not indicative of any investment. Past performance is no guarantee of future results. Stocks—Standard & Poor’s 500®, which is an unmanaged group of securities and is considered to be representative of the stock market in general; Bonds—5-year U.S. Government Bond; Inflation—Consumer Price Index.

~10.1% AnnualizedReturn Over 22 Years

How long will your retirement assets last?

Jan. 1, 1973 – Jan 1, 1995 = $694Jan. 1, 1995 – Jan 1, 1973 = $330,338

$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

$400,000

$450,000

$500,000

Year

1

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Impact of market returns on long-term portfolio values

Later Losses

Early Losses

Source: New York Life Investment Management LLC, 2006

$100,000

$200,000

$300,000

$400,000

$500,000

$600,000

Year 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29

A Closer Look at Retiree Risks Market Risk - Early Losses

Accumulation vs. Distribution

• Market risk has opposite affect on portfolios in accumulation and distribution phases

• Market risk is greatest in transition between accumulation and distribution phases

Market Risk

Market risk is greatest in years just before and after retirement

TimeAccumulation Distribution

Hypothetical example intended for illustrative purposes only and is not indicative of the actual performance of any particular product. Sales charges, taxes, and administrative fees are not taken into account and would reduce the performance shown.

What might $1,000 buy in the future?

0% 1% 2% 4% 6% 8% 10%1 $1,000 $990 $980 $962 $943 $926 $909

5 $1,000 $952 $906 $822 $747 $681 $621

10 $1,000 $905 $820 $676 $558 $463 $386

15 $1,000 $861 $743 $555 $417 $315 $239

20 $1,000 $820 $673 $456 $312 $215 $149

25 $1,000 $780 $610 $375 $233 $146 $92

30 $1,000 $742 $552 $308 $174 $99 $57

35 $1,000 $706 $500 $253 $130 $68 $36

Years fromnow

Source: The IFID Centre, 2004

Inflation

Hypothetical inflation rate

g

Knowing the Types of Annuities

• Immediate annuities– Guaranteed income for life– Guaranteed income for a certain

period• Deferred annuities

– Fixed– Variable

What is a Lifetime Income Annuity?

Why Should I Use a Lifetime Income Annuity?

Why Should I use a Lifetime Income Annuity?

*Rates effective as of 08/16/10

Issue Age Annual Payout Rate*

65 6.7% 75 8.7%85 12.4%

Issue Age Annual Payout Rate*

65 6.7% 75 8.7%85 12.4%

OK, What are Mortality Credits?

Understanding the Benefits of Risk Pooling and Mortality Credits

= $500$100 x 5

Suppose five 90 year-old women take a vacation together every year …

This example is hypothetical and intended for illustrative purposes only. It is not an indication of the actual performance of any particular product.

The five women place $100 in a box

Explaining Mortality Credits

Unfortunately one of the ladies died that year

So, they meet to vacation again

Now the four ladies split the $500; they now each have $125

That is a 25% rate of return

Question: How much was invested in the market?

What interest rate did it earn?

Explaining Mortality Credits

They decide to “let it ride”

The next year one more lady dies

Now the 3 ladies split the $500

They each get $167

That is a 67% return

All of this is based on mortality credits

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100

Age

Payo

ut

Investment Growth Return of Principal Mortality Credits

LIA Provides Clients with Higher Payouts

Components of Lifetime Income PayoutMale age 65, $100,000 investment

Lifetime income annuities deliver higher payouts because, in addition to distributing gains and principal, they subsidize those who die late with the capital of those who die early.

Source: New York Life, 2009.

Investment advisors can

manufacture this payout…

…but only an insurance company

can manufacture a mortality pool.

38

How Much Should Go into a Lifetime Income Annuity?

What Should I Do with theRest of My Money?

45

Asset Allocation Questionnaire by Ibbotson

14 questions– Age range– Risk tolerance– Income-to-expenses ratio– Bequest (legacy) motive– Expected longevity

46

Asset Allocation Tool by Ibbotson

Our Approach Directly Addresses Retiree Risks

Longevity– Income payments from Lifetime Income Annuities last as long as

you live

Inflation & healthcare costs– Lifetime Income Annuities provide 1%-5% inflation protection

options

Market risk– Lifetime Income Annuities have a zero standard deviation and

materially eliminate market risk to the income portion of a portfolio

– Covering basic expenses with Lifetime Income Annuities enables you to avoid taking withdrawals in unfavorable conditions

Overspending– Lifetime Income Annuities ensure you cannot exhaust your

income

Let’s Look at Some Ways We Help Real People Solve Real Problems…

CD Alternatives

Don’t be put off by those who want to wait, because time isn’t always on their side.

Don’t be put off by those who want to wait, because time isn’t always on their side.

RMD Maximization

Help Repair the Income Damage Caused by a Downturn in the Market

This concept card is helpful in illustrating how GLI can provide the same, or more, income even if the client has

less assets due to a downturn.

This concept card is helpful in illustrating how GLI can provide the same, or more, income even if the client has

less assets due to a downturn.

For mo

For mo

You’ve seen it in the papers…

Providing Investment SolutionsWhat Are Others Saying?

U S News & World Report(“Finding Income in Retirement” June 13, 2005)

• Annuities are “part of a diversified overall retirement plan. You can always use the other half or three quarters of your money to invest in a mix of bonds and stocks.”– This suggests that one quarter to one half of

your clients’ retirement portfolios should be used to purchase a lifetime income annuity

Forbes (“Do It Yourself Retirement” June 6, 2005)

• A better bet if you’re … worried about running out of savings might be to invest some of it in … [an] immediate annuity and invest the rest more boldly.

Providing Investment SolutionsWhat Are Others Saying?

Kiplinger’s Retirement Planning (Fall 2005)

• “The Perfect Portfolio When You’re Retired”

– “Retirees in their mid to late sixties should consider replacing some or all of their bond funds with immediate fixed annuities that pay guaranteed monthly checks for the rest of the policyholder’s life.”

– “Knowing you have this money coming in [from an immediate annuity] can also give you the confidence to invest the rest of your retirement savings more aggressively.”

– “Including an annuity in your portfolio can generally increase your monthly payouts beyond the safe 4% annual withdrawal level many financial advisors …recommend.”

You’ve Read it in the Papers

Clients Want to Know More

Clients are looking for answers

Always Remember

JUST SHOW IT!!

Powerful Language andSimple Solutions for Retirement

Tom Hegna CLU, ChFC, CASLFirst Vice President

New York Life Insurance Company

00411996 Exp. 12/31/10