The retirement revolution What boomers need to know when planning their retirement years

1. The retirement revolutionWhat boomers need to know when planning their retirement years

2. Today’s retirees • Second careers • Volunteering • Travelling the world • Fulfilling dreams and ambitions

3. Redefine retirement • Spend 1/3 of life in retirement • Financial needs of an entire generation

4. Biggest financial concerns • Outliving retirement savings • Inflation • Market volatility 1Source: Poll of 902 Canadians between the ages of 50 and 70 years by Maritz Research conducted between July 6 and 12, 2006. The results have a margin of error of +/- 3.3 per cent, 19 times out of 20.

5. Concern #1: Outliving retirement savings

6. Life expectancy • Couple aged 65 has: • 94% chance of 1 partner living to age 80 • 63% chance of 1 partner living to age 90 • Probability of having to fund retirement for 25 years longer Source: Annuity 2000 Mortality Table, Society of Actuaries

7. Probability of a healthy 65-year-old living until… Source: Annuity 2000 Mortality Table, Society of Actuaries

8. Concern #2: Inflation

9. Effect on retirement savings • Erodes the buying power of your savings

10. Example Based on a $0.08 stamp and $0.46 coffee in 1977 and a $0.52 stamp and $1.60 coffee in 2007.

11. Effects of inflation on $1,000

12. Inflation driven prices • Retirees more exposed • Between 1992 & 2004, Canadians aged 65 years & older: • Prices rose 26.1% Compared to • 24.4% for non-seniors Source: Statistics Canada, 2001 Survey of Household Spending.

13. Differences in spending patterns • Medical • Travel • Reading materials • Utilities • Rent and tenant’s expenses

14. Cost of health care • Federal budget restraints • Increasing health care needs • Pay more for medical costs on own

15. Fact • Canadian households are currently saving at levels that will not generate • sufficient income to cover their nondiscretionary expenses in retirement. – Canadian Institute of Actuaries, May, 2005

16. Strategies that can help • Retire to something • Working during retirement • Asset allocation • Stocks, bonds & cash • Growth component to investment • Invest holdings in equities

17. Concern #3: Market volatility

18. Unpredictable market conditions • Concern for those entering the retirement phase • Once lost, difficult to replace • Can’t work due to health

19. Retirement risk zone • 5 – 10 years before and after retirement • Affect ability to fund retirement • Impact ability to generate consistent and dependable income Moshe A. Milevsky and Thomas S. Salisbury, Asset Allocation and the Transition to Income: The Importance of Product Allocation in the Retirement Risk Zone. September 27, 2006.

20. Sequence of returns • Greater risk from stock market declines near retirement

21. Saving phase

22. Poor returns with the Retirement risk zone • Poor market returns early in retirement reduce ability to withdraw income • Portfolio may not have time to recover • Making withdrawals from savings

23. Scenarios for sequence of returns • 65 year old investor • $100,000 in retirement savings • Need to withdraw 9% of savings annually

24. Scenario 1 (7, 7, 7…) • Money could last 21 years or until age 86 • 7% annual return on investment every year For illustration purposes only.

25. Scenario 2 (27, 7, -13…) • Earn 27% in 1st year • Gain 7% in 2nd year • Lose 13% in 3rd year • Average rate of return is 7% • Money could last 9 years or until age 95 For illustration purposes only.

26. Scenario 3 (-13, 7, 27…) • Lose 13% in 1st year • Gain 7% in 2nd year • Gain 27% in 3rd year • Average rate of return is 7% • Money would be gone by age 81 For illustration purposes only.

27. Portfolio lifespan $140,000 $120,000 $100,000 $80,000 $60,000 $40,000 $20,000 $0 Retirement Savings 65 94 Age Scenario 1 Scenario 2 Scenario 3 Chart assumptions: 65-year-old investor with $100,000 in retirement savings, withdrawing nine per cent each year. For illustrative purposes only.

28. How long your money will last? • Role of luck • No guarantee • Need creative financial solutions

29. GMWBs – A great option • Help manage the risks related to the retirement risk zone • Funds that include a GMWB provide similar growth potential as mutual funds • Additional features and benefits to provide predictable, sustainable income • Amount of income you receive can be guaranteed for life

30. Protection features of GMWBs • Potential creditor protection • Potential to protect your assets • Estate benefits • Can direct to your designated beneficiaries without the time delay and expense of probate

31. GMWB features & benefits *Exceeding the withdrawal thresholds may have a negative impact on future payments. Other conditions may apply.

32. Speak to your advisor

33. Important notes • The commentary in this presentation is for general information only and should not be considered investment or tax service to any party. Individuals should seek the advice of professionals to ensure that any action taken with respect to this information is appropriate to their specific situation. • Manulife Investments is the brand name identifying the personal wealth management lines of business offered by Manulife Financial and its subsidiaries in Canada. As one of Canada’s largest integrated financial services providers, Manulife Investments offers a variety of products and services including: segregated funds, mutual funds, principal protected notes, annuities and guaranteed interest contracts. • Manulife and the block design are registered service marks and trademarks of The Manufacturers Life Insurance Company and are used by it and its affiliates including Manulife Financial Corporation.