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The retirement landscape in America is changing.

The retirement landscape in America is changing. The fastest growing segment within the United States population are those citizens age 80 and over. Source: US Census Bureau. 80 -. 70 -. 60 -. Challenge #1. Americans are living longer than ever before.

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The retirement landscape in America is changing.

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  1. The retirement landscape in America is changing. The fastest growing segment within the United States population are those citizens age 80 and over. Source: US Census Bureau

  2. 80 - 70 - 60 - Challenge #1 Americans are living longer than ever before. For many, retirement will now last 20 to 30 years or more. US Life Expectancies 1929 2002 Source: National Vital Statistics Reports, Vo. 53, No. 6, November 10, 2004

  3. Challenge #1 More change! The rising population of new retirees and a longer average retirement places pressure on the US retirement system. Proper planning now can ensure that you are ready for the challenges that lie ahead.

  4. Challenge #2 The High Cost of Inflation Year in and year out, inflation erodes the purchasing power of your retirement savings. 160 - CPI Average Growth Rate 4.35% 120 - 80 - 40 - 1975 2005 1990 Source: US Department of Labor

  5. Challenge #2 According to the U.S. Department of Labor’s Inflation Calculator: • Groceries that used to cost you $100 in 1975 now cost more than $359 today. • A $7,000 automobile now costs more than $25,000. • The price of a gallon of milk has increased by more than 3.5 times. Inflation reduces your purchasing power. Source: Bureau of Labor Statistics, http://www.bls.gov/cpi/home.htm

  6. Challenge #3 Taxes They’re not really so complicated after all. “The more you earn, the higher percentage you will pay.” Source: Tax Facts 2005, Appendix B

  7. Challenge #4 Impact on Social Security Benefits As demand on Social Security increases, so does pressure to make changes to the existing system. Many experts believe that more changes lie ahead.

  8. Challenge #4 Did you know as much as 85% of your Social Security benefits can be subject to income tax? Provisional Income includes the total of normal earned income like interest from CD’s as well as one-half of the Social Security benefits you receive and even tax-exempt income such as interest earned from tax-free municipal bonds.

  9. Challenge #5 Market Risk • Which of these statements best describes you? Safety Conservative “When I was younger, I had time to make up for market losses. Today, I like knowing that my money is SAFE and GROWING each and every day. I like the assurance that I will never lose the money I have worked so hard to accumulate.” Moderate “Some risk is good as it could increase my returns. However I cannot afford to lose a substantial portion of my retirement funds.” Aggressive “I am willing to risk some or all of my money in exchange for the hope of a higher return.” Risk Should all of your assets be exposed to the same level of risk?

  10. Challenge #5 Market Risk & Access to Your Money Markets rise and fall on a daily basis. Accessing your money during a market downturn can dramatically affect how long your retirement dollars will last. Other considerations: Fees & Commissions

  11. Summary • Longer Life Expectancies: Is there a way to ensure that your money lasts throughout your lifetime? • Inflation: Can you keep pace with or even outpace inflation? • Taxes: Can you control when or if you pay taxes during your lifetime? Can you reinvest earnings without taxation? • Social Security: Can you avoid the tax liability on your Social Security benefits? • Safety: Can you guarantee your principal and past growth against market risk? • Access: Can you accomplish this and still have sufficient access to your money when needed?

  12. Opportunities One Solution: • A Tax-Deferred Fixed Annuity • A Tax-Deferred Annuity is a contract between you and an insurance company. This contractual relationship provides certain features and advantages that many people find beneficial in their overall financial picture.

  13. Opportunities Let’s review the common CHALLENGES again and identify some SOLUTIONS

  14. Challenge #1: Longer life expectancies now extend retirement for many years. Solution: An annuity is the ONLY financial vehicle that can provide a guaranteed income for life; no matter how long you live.

  15. Challenge #2: Inflation. Keeping up with rising costs. Between 1975 and 2005, Consumer Prices have increased by 4.35% per year. Solution: A tax-deferred annuity can help you grow your money more efficiently with competitive rates of return and tax-deferred accumulation.

  16. Challenge #3: Income Taxes. Every year, taxes can take a substantial portion of your earnings. You are paying the IRS for your interest, dividends, and capital gains. Solution: Tax-deferral puts you in control of when you will pay taxes on the interest you earn.

  17. Tax-Deferral is your right to decide, if ever in your lifetime, to pay taxes on the interest you earn. • You earn interest on your principal. • You earn interest on your interest. • You earn interest on the money you would have otherwise paid in taxes.

  18. $300,000 $250,000 $200,000 $150,000 $100,000 $50,000 $0 Taxable Account at 6% Tax-Deferred Account at 6% Tax-Deferred Account After Tax* Tax Deferral…is Tax Control The Difference is Dramatic! $50,000 Initial payment – 28% Individual Tax Bracket $287K $220K $177K $160K $129K $116K $89K $78K $76K $66K $62K $61K 5 years 10 years 20 years 30 years Taxes are deferred until withdrawals are taken. Tax deferral is generally available only to individuals. Under current tax law, tax deferral is a basic feature of qualified plans. Placing qualified funds into an annuity does not provide any additional tax benefit. Withdrawal may be subject to income tax, and penalty tax may apply to withdrawals before age 59 ½.

  19. Challenge #4: Social Security benefits lost to income taxes due to Provisional Income calculations. Solution: One type of income that is not included in the Provisional Income formula is Tax-Deferred income. By simply putting some of your assets into a Tax-Deferred Annuity and leaving the interest to compound internally, you can control your income flow to meet your needs without taxing your important Social Security benefits.

  20. INVESTMENT EFFECTS ON SOCIAL SECURITY INCOME Sample Retiree’s Total Income Pension Social Security Interest Income Muni Bonds* CDs, Money Market* Tax Deferred Alt. Total Interest Income Threshold Income Social Security Tax % Subject to Tax Tax on Social Security Federal Income Tax With taxable interest With tax deferred interest $19,200 $5,700 $ 0 $ 0 $16,800 $16,800 $24,900 0% $ 0 $ 0 $1,249 $19,200 $5,700 $4,000 $12,800 $ 0 $16,800 $41,700 85% $9,690 $2,423 $5,209 $19,200 $11,400 $4,000 $12,800 $ 0 $16,800 1/2 A tax Reduction of 76% $11,400 *Declared for tax purposes but not currently taken as income

  21. Challenge #5: Market Risk. Markets rise and fall on a daily basis. Solution: Deferred Annuities insulate you from negative market movements. An annuity guarantees your principal and any growth inside your plan.

  22. Other Benefits of a Tax-Deferred Fixed Annuity • Avoid the costs and delays of probate. • Avoid fees for accessing your money when you need it. Annuities provide access to funds through penalty free withdrawals. See policy for exact provisions. • No up-front sales charges. • Competitive rates. • Safety.

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