Sales Ideas for Life Insurance Awareness Month Dial-In Number: 1 (213) 929-4232 Webinar ID: 140-880-531 SEPTEMBER 2016

Welcome Sarah Molitor Stoyan Petev Steve Schreiber Dial-In Number: 1 (213) 929-4232 Webinar ID: 140-880-531

Minimizing the Sequence of Returns Risk September 2016 Dial-In Number: 1 (213) 929-4232 Webinar ID: 140-880-531

Goal Prepare you to be able to explain to a client how life insurance can reduce your client's portfolio risk and eliminate the sequence of returns risk. Dial-In Number: 1 (213) 929-4232 Webinar ID: 140-880-531

Practical Life Insurance Ideas Stoyan Petev, CFA, CFP, CLU, ChFC VP of Advanced Designs First Heartland Companies

The Biggest Retirement Risks To Your Clients’ Portfolios #1 Market Risk

The Biggest Retirement Risks To Your Clients’ Portfolios #2 Interest Rate Risk Bond prices fall As interest rates rise

The Biggest Retirement Risks To Your Clients’ Portfolios But what about: #3 Sequence of Returns Risk #4 LTC Risk

Why Sequence of Returns? During the Accumulation Phase, it rarely matters:

Sequence of Returns - Distribution Bur it matters during distribution:

Case Study 1

Case Study 1 – Option B

Are You Asset- and Income-Diversified?

Life Insurance As an Alternative Asset Class – Case Study 2

Life Insurance As an Alternative Asset Class – Case Study 2

Retirement Risk #4 - LTC 66% of people age 65 will need some form of LTC. 2016 average cost of care in Atlanta: $3,337/mo. for HHC $6,540/mo. for semi-private room in NH $6,996/mo. for private room in NH Ways to pay for care: Self-Insure Stand-Alone LTC Policy Asset-Based LTC or Life Insurance w/ CI or LTC Rider

Male, 55, Preferred NS, $500K Level DB, Pay All Years Case Study #3 Male, 55, Preferred NS, $500K Level DB, Pay All Years Premium LTC Benefit DB Guarantee Target Premium $5,962 Unknown - TBD N/A $6,890 $6,909 $10,000/mo. $7,450 $7,283 $20,000/mo. $7,403 34 Years $7,186(spousal dis)

Managed Money and Sequence of Returns Risk

How do I… … take a $500,000 managed account projected to erode to nothing from retirement withdrawals at age 85 and leave a legacy of over $220,000?

The Problem 100% Managed Money Value at age 80: $250,978 . Value at age 85: $0

Don’t Have Clients Sell Into a Loss! Case Details Client information Current age of 55 Income starts at age 65 Assumptions Account balance: $500,000 1% ongoing advisory fee 5% withdrawal at retirement inflated at 2%

Assumed Sequence of Returns Average rate of return assumed in the managed account: 8.00% The sequence has the largest impact when withdrawals are being taken -20.00% -10.00% 10.00% 20.00% 30.00%

100% Managed Money Withdrawal Years Age Year Beginning of Year Balance   Beginning of Year Balance Annual Withdrawal Post Withdrawal Balance Hypothetical S&P500 Return End of Year Balance 65 11 899,778 -44,989 854,789 -20.00% 676,993 66 12 -45,439 631,554 -10.00% 562,714 67 13 -45,893 516,821 10.00% 562,818 68 14 -46,352 516,466 562,432 69 15 -46,816 515,616 561,506 70 16 -47,284 514,222 559,988 71 17 -47,757 512,232 557,820 72 18 -48,234 509,586 554,939 73 19 -48,717 506,223 20.00% 601,392 74 20 -49,204 552,189 30.00% 710,667 75 21 -49,696 660,971 523,489 76 22 -50,193 473,297 421,707 77 23 -50,695 371,013 404,033 78 24 -51,202 352,831 384,233 79 25 -51,714 332,520 362,114 80 26 -52,231 309,883 337,463

80% Managed Money 80% of the account remains as AUM 20% is used to purchase indexed UL

80% Managed Money Withdrawal Years Age Year Beginning of Year Balance   Beginning of Year Balance Annual Withdrawal Post Withdrawal Balance Hypothetical S&P500 Return End of Year Balance 65 11 719,822 -44,989 674,833 -20.00% 534,468 66 12 -10.00% 476,211 67 13 10.00% 518,594 68 14 -47,743 470,851 512,757 69 15 -48,697 464,059 505,361 70 16 -49,671 455,689 496,246 71 17 -50,665 445,581 485,238 72 18 -51,678 433,560 472,146 73 19 -52,712 419,435 20.00% 498,288 74 20 -53,766 444,523 30.00% 572,101 75 21 -54,841 517,259 409,669 76 22 365,015 77 23 397,502 78 24 -58,198 339,304 369,502 79 25 -59,362 310,140 337,743 80 26 -60,549 277,193 301,864

20% Life Insurance

20% Life Insurance

100% vs 80% 100% Managed Money Value at age 80: $250,978 80% Managed Money & 20% IUL Value at age 80: $250,978 . Value at age 85: $0 Value at age 80: $422,113 $301,864 + $120,249 of life insurance cash value Tax free death benefit at age 80 of $137,222 Value at age 85: $261,817 $64,173 + $197,644 of life insurance cash value Tax free death benefit at age 85 of $221,515

Stoyan Questions for us? Steve