ABC_WORKSHOP_PPT__1.5_Hr__2014_v9.pptx

DISCLAIMERThe Course “Conservative Investing made 123 Easy” is an educational program, and is not intended to sell investment or insurance products, nor is it intended to provide tax or legal advice. Consult with your tax advisor and/or legal counsel for suitability for your specific situation.

Hypothetical and/or actual historical returns contained in this presentation are for informational purposes only and are not intended to be an offer, solicitation, or recommendation. Rates of return are not guaranteed and are for illustrative purposes only.

Projected rates do not reflect the actual or expected performance within any example or financial product.

David S. Edge and David P. Schaeffer are Licensed Financial Professionals with American Retirement Advisors.

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Things you should know!

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Things you should know!

AmericanRetire.com/ Radio

Warren Buffets Rules for Investing

2. Always follow rule #1

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What we will cover!

• How to eliminate the “what if’s” and guesswork

• The elements of a retirement income plan

• How to feel good about your investing decisions

• How to analyze mutual fund performance

• How brokers are really paid.

• How to identify outdated models

• Identify opportunities for maximum returns

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Forbes Magazine

“Todays retirees have no use for theories, guesswork or past performance. They

need certainty and guarantees.”

~~David P. Schaeffer

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Our need to do a better job!

• Life based on things we can count on creates peace of mind.

• Understanding change is inevitable, your expenses are relatively constant.

• • Wouldn’t predictable income be nice it

were possible?

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Phases of your Investment Life

• While working you are ACCUMULATING• As you approach and enter retirement you

should be PRESERVING• After you fully transition to retirement is

called DISTRIBUTION

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Why Are We Here?

• Do you know how all of your assets (stocks, bonds, mutual funds, annuities, REITS, Life Insurance, etc.) work together to achieve the amount of risk you want in your total portfolio?

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Conservative Investing

• It is not “FAD” investing

• It is for the “Long Haul Investing”

• It allows you to sleep at night

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RISK and what is it?

• Market Risk• Business Risk• Inflation Risk• Sovereign Risk• Interest Rate Risk• Re-Investments Risk

• Price Risk• Liquidity Risk• Systematic Risk• Un-Systematic Risk• Event Risk• Political Risk

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RISK TOLERANCE SCALE

+ 8% + 15% + 26% + 34% + 100% - 8% - 9% - 17% - 23% - 100%

Con

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So, What the Heck Just Happened?Cultural and social Shifts

S&P 500 Chart 1934 - 2014

Welcome to the “camel times”

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5.28%Compounded rate of

Return without withdrawals

ThisYear

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• Cultural Shift

• Investing vs. Gambling

• Pensions & 401(K) Plans

Times have changed

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Suggested Reading

• 1988 – Only legal in 2 states.

• 1994 – Operating in 23 states.

• 2000 – Over 34 million people visited Vegas.

• 2000 – Over 127M people visited casinos.

• 2003 – Casinos were operating in 48 states

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Where did my pension go?

• 1978 – Section 401k was amended.

• 1983 – 50% of large Companies switched to 401k

• 1985 – About 8M & 100 billion invested in 401k’s

• 2006 – 70M+ people and 3 Trillion Invested.

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• Wall Street is Disconnected

• Information Overload

• Long-Term Market Returns

The Need For A New Model

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Dow S&P 500 7.74%9.01%4.09%4.79%

13.56%

7.63%7.14%2.76%5.28%

14.68%

Compounded Rates of Return

CD’s40 Year20 Year15 Year10 Year 5 Year

9.32%6.78%6.36%4.41%3.33%

Source: DOW & S&P500 returns from financial.google.com, as of 01/01/2014. DJI returns from Indices are unmanaged, do not incur fees or expenses.

Source: 5 year CD rates from Federal Reserve Board.s

The Model

• Where to allocate assets to avoid volatility.

• Which assets to use and why.

• “123 Easy” process to achieve your goals.

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The Model

• Three Purposes of Money

• Yellow is LIQUID and available on Demand

• Green is PROTECTED and is Principal Insure

• Red is to hedge against INFLATION

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The ModelA

Demand Accounts(Cash)

Low Interest

Taxable or Tax-Deferred

Liquid

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The Yellow Money Rules1. Accessible with no penalties2. Accessible with minimal penalty

BPrincipal Insured

(Growth/Income)

Moderate Interest

Tax-Deferred

Partial Liquidity

The Model

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The Green Money Rules1. Your Principal is Fully Insured 2. All Interest Earned is Yours3. Income is Guaranteed

CRisk

(Growth/Income)

Gains (Loss)

Taxable or Tax-Deferred

Partial or Liquid

The Model

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The Red Money Rules1. Your Principal is at Risk2. All Gains and Loss fluctuate 3. No Guarantees

A B CDemand Accounts

(Cash)Principal Insured

(Growth/Income)Risk

(Growth/Income)

Low Interest

Taxable or Tax-Deferred

Liquid

Moderate Interest

Tax-Deferred

Partial Liquidity

Gains (Loss)

Taxable or Tax-Deferred

Partial or Liquid

The Model

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What is Your Goal?A B C

Demand Accounts(Cash)

Principal Insured (Growth/Income)

Risk(Growth/Income)

Low Interest

Taxable or Tax-Deferred

Liquid

Moderate Interest

Tax-Deferred

Partial Liquidity

Gains (Loss)

Taxable or Tax-Deferred

Partial or Liquid

Access to Cash Protection Gains (Loss)

Growth Liquidity Protection

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Aggressive (at Age 65)

A B CDemand Accounts

(Cash)Principal Insured

(Growth/Income)Risk

(Growth/Income)

Low Interest

Taxable or Tax-Deferred

Liquid

Moderate Interest

Tax-Deferred

Partial Liquidity

Gains (Loss)

Taxable or Tax-Deferred

Partial or Liquid

10 % 0% 90%

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Conservative (at Age 65)

A B CDemand Accounts

(Cash)Principal Insured

(Growth/Income)Risk

(Growth/Income)

Low Interest

Taxable or Tax-Deferred

Liquid

Moderate Interest

Tax-Deferred

Partial Liquidity

Gains (Loss)

Taxable or Tax-Deferred

Partial or Liquid

10 % 60% 30%

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“Hulbert’s data shows that more than 84% of mutual funds underperform the market over a 5-year period. Over ten years, that number rises to 90%.”

Morningstar Publications

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Say Goodbye to the 4% rule

“ If you retired in in January 1, 2000 and withdrew 4% each year from a portfolio of 55% stocks and 45% bonds you would have lost 33% of your principal savings.

71% of people using this traditional mutual fund strategy will outlive their money.”

~~Wall Street Journal and T. Rowe Price.

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• Measuring (The Unknown)

– Systematic Risk– Volatility– Variance

• Indicators– Alpha (Always looking to increase over 1.0)

– Beta (Always looking to decrease below 1.0)

– Standard Deviation (Always looking for Zero)

– R-Squared (Always looking for 85 or more)

Class Exercise - Red Money

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• Every 3 years you have a bear market.

• Every 8 years you have a significant bear market.

• If you hold your money for 17 years you won’t have a problem.

On Average

The Anatomy of a Bear

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The Last Bear Market 2000-2009S&P 500 Returns

1 2 3Total

Gain / Loss$

Gain / Loss%3% 7% cap S&P 500

2000-2009 $50,000 $0 $450,000 $500,000

-10.14% $51,500 $0 $404,370 $455,870 -$44,130 -9%

-13.04% $53,045 $0 $351,640 $404,685 -$51,185 -11%

-23.37% $54,636 $0 $269,462 $324,098 -$80,587 -20%

26.38% $56,275 $0 $396,821 $72,723 23%

8.99% $0 $429,125 $32,303 8%

3.00% $59,703 $0 $382,296 $441,998 $12,874 4%

13.62% $61,494 $0 $434,464 $495,858 $53,860 12%

3.53% $63,339 $0 $449,698 $513,036 $17,178 3%

-38.49% $65,239 $0 $276,609 $341,848 -$171,188 -34%

19.67% $67,196 $0 $331,018 $398,214 $56,366 16%

After 10 Yrs $67,196 $0 $331,018 $398,214 $101,786 -20%Your Mix 10% 0% 90%

-$101,786 Less in your accounts

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The “123 Model” in the Last Bear MarketS&P 500 Returns

1 2 3Total

Gain / Loss$

Gain / Loss%3% 7% cap S&P 500

2000-2009 $50,000 $300,000 $150,000 $500,000

-10.14% $51,500 $300,000 $134,790 $486,290 -$13,710 -3%

-13.04% $53,045 $300,000 $117,213 $470,258 -$16,032 -3%

-23.37% $54,636 $300,000 $89,821 $444,457 -$25,801 -5%

26.38% $56,275 $321,000 $113,515 $490,791 $46,334 10%

8.99% $525,154 $34,363 7%

3.00% $59,703 $540,909 $15,755 3%

13.62% $61,494 $584,820 $43,911 8%

3.53% $63,339 $391,901 $149,899 $605,138 $20,318 3%

-38.49% $65,239 $391,901 $110,339 549,342 -$55,796 -9%

19.67% $67,196 $419,334 $92,203 $596,969 $47,427 9%

After 10 Yrs $67,196 $419,334 $110,339 $596,969 $96,869 19%Your Mix 10% 60% 30%

$198,655 more in your accounts

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Year FourYear One Year Two Year Three

10%4% cap

-40%

0%

6%

4%

Your up 8%+

4%

Your up 12%+

15%

FIA Simple Four Year Graph

Still up 4%

Your up 4%

• Market

• FIA

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Actual FIA Historical Performance*

*DISCLOSURE: This is a Hypothetical Graph that reflects the actual interest crediting methods used by a specific insurance company from a time period beginning 09/30/1998 and ending on 09/30/2013. Individual results may vary and be dependent upon crediting methods, caps and participation rates. This is for illustration purposes only to show how a Fixed Index Annuity may have performed over a specific period of time.

Annual Monthly Average

S&P 500

2.75% Compounded

Interest

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The Greatest Need… INCOME

• So… when will you need income?

• What is your plan to make your income last up to three decades?

• What affect would market losses have on your retirement income?

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Accumulation on $500,000 Inverse Returns Effect

Year Annual Return End of Year Value

Inverse Return End of Year Value

1 +28% $640,000 -38% $310,000

2 -10% $576,000 -12% $272,800

3 +15% $662,400 +2% $278,256

4 +17% $775,008 +15% $319,994

5 +1% $782,758 +26% $403,193

6 +26% $986,275 +1% $407,225

7 +15% $1,134,216 +17% $476,453

8 +2% $1,156,901 +15% $547,921

9 -12% $1,018,073 -10% $493,129

10 -38% $631,205 +28% $631,205

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Income on $500,000 Inverse Returns Effect

Year Annual Return

Annual Withdraw

End of Year Value

Inverse Return

End of Year Value

1 +28% $35,000 $605,000 -38% $275,000

2 -10% $36,225 $508,275 -12% $205,775

3 +15% $37,493 $547,023 +2% $172,398

4 +17% $38,805 $601,212 +15% $159,452

5 +1% $40,163 $567,061 +26% $160,746

6 +26% $41,569 $672,928 +1% $120,785

7 +15% $43,024 $730,843 +17% $98,294

8 +2% $44,530 $700,930 +15% $68,509

9 -12% $46,088 $579,730 -10% $15,570

10 -38% $47,701 $306,151 +28% (-$27,772)

5.8% Inflation Adjusted Annually

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Steps to a “123 Easy” Plan• Step One –

– Gather Your Investable Assets– Discuss your Retirement Goals / Budget

• Step Two – Determine Your Yellow, Green & Red Mix– Create Your Retirement Planning Time Line

• Step Three – Review and Adjust (Rinse and Repeat)

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Income Planning “The 123 Easy Method”

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Is Guaranteed Income Important to You in Retirement?

Are you still paying management fees on your entire portfolio?

Hmmm…

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The “123 Easy” Dating Process

• Discovery• Recommendation• Clarify and Initiate• Review and Refine

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Register Today For Your Free:1. Subscription to the “American Retirement Advisor”

2. David Vick’s Book

3. Your Financial Snapshot & Planning Time Line

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