SAVING : INVESTING : PLANNING RESILIENCE rethink, rebuild, retire.

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SAVING : INVESTING : PLANNING RESILIENCE rethink, rebuild, retire

Transcript of SAVING : INVESTING : PLANNING RESILIENCE rethink, rebuild, retire.

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  • SAVING : INVESTING : PLANNING RESILIENCE rethink, rebuild, retire
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  • Key strategies >Help you rethink your current situation. >Provide choices on how to rebuild your retirement savings. >Guide you in reestablishing your plan to retire on your terms. 2 rethink rebuild retire
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  • You are not alone >At the start of 2008, 40% of 401(k) participants age 55 - 65 had more than 70% of their account balances in stocks. >Participants with large account balances had an average loss of more than 25%. 3 rethink rebuild retire Source: VanDerhei, Jack. The Impact of the Recent Financial Crisis on 401(k) Account Balances. Issue Brief No 326. Executive Summary. EBRI (Employee Benefit Research Institute). February 2009.
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  • Rethinking retirement 4 You can't have a better tomorrow if you are thinking about yesterday all the time. - Charles F. Kettering rethink rebuild retire
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  • The new economic reality is >Inflation is inevitable. >This is one of the longest recessions in history. >Expect unemployment rates of 8% as the new norm. >A global economy drives international interests. >Real estate, commodities, and foreign stocks purchased with foreign currency should be reconsidered. >Rebuilding retirement savings may take up to 10 years. 5 rethink rebuild retire
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  • Historically speaking 6 rethink rebuild retire Black Monday Gulf War and S&L Crisis Source: Chart data. Dana Anspach. A Year by Year Look at the S&P 500 Stock Market Returns Since 1973. About.com. http://moneyover55.about.com/od/howtoinvest/a/marketreturns.htm.
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  • Ten-year forecast 7 rethink rebuild retire Source: Anspach, Dana. Historical Bear Market and their Subsequent Recoveries. About. com. http://moneyover55.about.com/od/howtoinvest/a/bearmarkets.htm. (The calculations above are based upon the raw index value of the S&P 500 and thus would not include the impact of any reinvested dividends.)
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  • Your current situation >Review financial statements. >Determine income. >Reduce expenses. >Revisit your retirement goals. >Evaluate your time horizon. >Decide the tradeoffs that you are willing to make. 8 rethink rebuild retire
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  • Rebuilding retirement 9 If you come to a fork in the road, take it. - Yogi Berra rethink rebuild retire
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  • The truth is >The road to recovery might include working longer, saving more, and fixing your investment mix in order to rebuild your retirement. 10 rethink rebuild retire
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  • Why work longer? >60% view retirement as an opportunity for a new, exciting chapter in life. >70% stated they want to include work in their retirement. 11 rethink rebuild retire Source: Retirement Tipping Point. A National Study Exploring How Four Generations are Rethinking Retirement. Age Wave and Harris Interactive. http://www.agewave.com/research/landmark_retirementTipping Point.php. March 2009.
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  • Work longer because we live longer >50% chance one spouse will live beyond 92 >25% chance for a couple age 65 to live beyond 97 12 rethink rebuild retire
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  • Benefits of working longer >More years to keep earning. >Access to employers medical plan. >Employer matching in qualified plans. >Social Security annual payments are larger the longer you wait to begin receiving them. 13 rethink rebuild retire
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  • Why save more? 14 Individuals generally should spend no more than 5% of their retirement savings each year to make it last for over 30 years. If they spend more, they may outlive their money. - EBRI 2007, How are New Retirees Doing Financially in Retirement? brief. rethink rebuild retire
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  • Saving during a recession 15 rethink rebuild retire Past performance does not guarantee future results. This example is hypothetical only and is not based on any specific investment fund. Based on historical data. Source: Hypothetical example created by Acumen. July 2009. The years 1932, 1949, and 1982 were used as low points in prior U.S. recessions to develop an average recovery rate.
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  • Save more >Committing to save more might require you to spend less. >Take advantage of your employers plan by saving the maximum allowed by law. >If you are age 50 or older, you can use the catch-up provision to save more. 16 rethink rebuild retire
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  • Save with dollar-cost averaging >Dont try to time the market. >Compounding interest is extremely powerful and a good way to re-grow savings. >At age 50, you could live 30 or more years, so you still have a chance for compounding to work for you. 17 rethink rebuild retire
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  • Dollar Cost Averaging > It does not assure a profit and does not protect against market loss. > This type of investing involves continuous investment in securities regardless of fluctuating price levels so investors should consider their financial ability to continue their purchases through periods of both high and low price levels. 18 rethink rebuild retire You need to know
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  • Fix your mix Diversification >Its not just stocks and bonds anymore. Rebalancing >Keeps risk level in check to help minimize risk. >Adjusts asset mix based on investment strategy. 19 rethink rebuild retire Note: Neither asset allocation nor diversification ensure a profit or protect against market loss.
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  • What if you could protect against losses? >Lifetime withdrawal benefits Lock in market gains automatically Lock out market downturns Guaranteed income for retirement 20 rethink rebuild retire
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  • Funding your retirement >Jackie and Jason each have a $100,000 nest egg invested 70% in stocks and 30% in bonds. >They are both age 65 and retired. >They are both withdrawing 5% per year during this current down market. >They are no longer contributing to their accounts. 21 rethink rebuild retire
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  • Year Rate of Return Acct Value before Withdrawal Withdrawal Amount Acct Value After Withdrawal 10%$100,000$0$100,000 2-2.60%$96,750$5,000$91,750 3-6.00%$85,632$5,000$80,632 4-11.59%$70,701$5,000$65,701 520.81%$78,821$5,000$73,821 68.66%$79,690$5,000$74,690 74.07%$77,239$5,000$72,239 812.10%$80,525$5,000$75,525 95.82%$79,497$5,000$74,497 10-24.03%$56,202$5,000$51,202 22 $45,000 This illustration is hypothetical and assumes past performance of the S&P 500 Index. Calculations based on actual rate of return experienced from 2000 2008. This illustration is not intended to be indicative of the performance of any specific investment. Indexes are unmanaged and you cannot invest directly in them. The performance illustrated is not indicative of future results. Source: Acumen. July 2009. rethink rebuild retire Guaranteed lifetime withdrawal benefit
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  • Year Rate of Return Acct Value before Withdrawal Withdrawal Amount Acct Value After Withdrawal 10%$100,000$0$100,000 2-2.60%$97,400$4,870$92,530 3-6.00%$86,983$4,349$82,634 4-11.59%$73,056$3,653$69,403 520.81%$83,846$4,192$79,653 68.66%$86,547$4,327$82,220 74.07%$85,562$4,278$81,284 812.10%$91,119$4,556$86,563 95.82%$91,601$4,580$87,021 10-24.03%$66,106$3,305$62,801 23 This illustration is hypothetical and assumes past performance of the S&P 500 Index. Calculations based on actual rate of return experienced from 2000 2008. This illustration is not intended to be indicative of the performance of any specific investment. Indexes are unmanaged and you cannot invest directly in them. The performance illustrated is not indicative of future results. Source: Acumen. July 2009. $38,111 rethink rebuild retire No guaranteed lifetime withdrawal benefit
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  • Income for life Year Acct Value before Withdrawal Withdrawal Amount Acct Value After Withdrawal 200$00 Year Acct Value before Withdrawal Withdrawal Amount Acct Value After Withdrawal 200$5,0000 24 $5,000 for life $0
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  • GMWB Guaranteed Minimum Withdrawal Benefit > With this type of investment, you can typically withdraw a certain percent (i.e., 5%, 10%) of your Benefit Base (the total guaranteed amount available for withdrawal) each year, depending on when you take your first withdrawal. > A guaranteed lifetime income of a maximum percent (i.e. 5%) is typically available if you wait until a certain age to take your first withdrawal. Guarantees > Guarantees are backed by the claims-paying ability of the issuing company. > This optional feature is generally available for an annual percentage fee of the benefit base and may not be offered to investors over a certain age. > This fee is typically deducted quarterly from the contract value as long as the contract value is greater than zero. Of course, the fee for the protections provided reduces the total growth potential of your account. > Keep in mind that annuities are designed for long-term retirement investing. Withdrawals are subject to ordinary income tax and federal restrictions and a tax penalty might apply to early withdrawals. 25 rethink rebuild retire You need to know
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  • Tax Deferral > With a variable annuity, you wont pay taxes on any interest, dividends or capital gains earned until you withdraw your money. > Income taxes are payable on withdrawal and tax penalties may apply to early withdrawals. Federal restrictions on withdrawals may also apply if part of an employer-sponsored plan. Investment Options > There are risks associated with investing in a variable annuity, including possible loss of principal. The contract, when redeemed, might be worth more or less than the total amount invested. 26 rethink rebuild retire You need to know
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  • No withdrawals > If you decide not to take withdrawals under the GMWB feature, or you surrender the contract, you will not receive the benefits of this investment. You could pay for the feature and not need to use it. Contributions > Contributions to your variable annuity contract can qualify to be tax deferred, subject to applicable contribution limits and related rules. > That tax deferral is a result of issuing the contract, which satisfies specific important tax law requirements, including plan requirements, under your workplace retirement plan. > It does not result from the mere fact that the contract is an annuity. Therefore, you do not receive any additional tax-deferred treatment of earnings beyond the treatment provided by the tax-qualified retirement plan itself. 27 rethink rebuild retire You need to know
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  • Fees > Be sure to check the current prospectus for all fees associated with this type of investment. These fees could include Separate Account fees, fund management fees, and the GMWB fee. > Additionally, account maintenance fees and surrender charges might apply, depending on your contract. > Neither The Variable Annuity Life Insurance Company nor its financial advisors or other representatives give legal or tax advice. For information about how an investment like this one is treated for income tax purposes, consult a qualified tax advisor about your particular circumstances. 28 rethink rebuild retire You need to know
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  • Finish strong 29 The race is not always to the swift, but to those that keep on running. - Author Unknown rethink rebuild retire
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  • Lessons learned Live within your means81% Begin saving at an early age65% Avoid high-interest debt22% Learn how to invest wisely14% 30 rethink rebuild retire Source: Retirement Tipping Point. A National Study Exploring How Four Generations are Rethinking Retirement. AgeWave.com. March 2009.
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  • Implement a plan >Rethink your current situation. >Rebuild by understanding your choices. >And, one more step 31 rethink rebuild retire
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  • Take action >Contact an advisor today >Ask questions >Be involved 32 rethink rebuild retire
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  • What VALIC offers >Comprehensive financial planning >Specialized retirement planning >Longevity in the financial industry >Range of investment products 33 rethink rebuild retire
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  • Evaluation
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  • Securities and investment advisory services are offered by VALIC Financial Advisors, Inc., member FINRA and an SEC-registered investment advisor. The VALIC logo represents The Variable Annuity Life Insurance Company and its subsidiaries, VALIC Financial Advisors, Inc. and VALIC Retirement Services Company. The information in this presentation is general in nature and may be subject to change. Neither VALIC nor its financial advisors or other representatives give legal or tax advice. Applicable laws and regulations are complex and subject to change. Any tax statements in this material are not intended to suggest the avoidance of U.S. federal, state or local tax penalties. For legal or tax advice concerning your situation, consult your attorney or professional tax advisor. Copyright The Variable Annuity Life Insurance Company. All rights reserved. VALIC.com VC22733 (09/2009) J74946 EE 35
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  • SAVING : INVESTING : PLANNING THANK YOU rethink, rebuild, retire