1. Approaching Clients Near Retirement
Devin Reid
Product Manager
Bryan Mueller, ChFC
VP, Field Training & Sales Support
CompEdge Financial

2. The Retirement Conversation Has Changed

3. The retirement unknown
Family
Government
One way to look at the answer to this question is to go back in time.
Early in our country’s history it was the “Family” that supported you when working was no longer an option. You moved in with family and were taken care of….of course with life expectancies back then the commitment by family was relatively short-term.
Then in 1935 the Social Security Act signed into law a system that would provide retired workers an income check beginning at age 65.

4. The retirement unknown
Planning for possible Social Security adjustments
1950:
16.5 workers to…
1 beneficiary
2005:
3.3 workers to…
1 beneficiary
But let’s take a look at that retirement system: and see where it’s heading. One thing we all know has changed significantly is the ratio of covered workers to Social Security beneficiaries
1950: workers per beneficiary
2005: 3.3 workers per beneficiary
2025: 2.4 workers per beneficiary (estimated)
Change is due to:
Size of the boomer generations (in 2011, older boomers hit age 65).
People are living longer.
Relatively lower birth rates are reducing the number of employees entering the workforce.
2025:
2.4 workers to…
1 beneficiary
"The 2014 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds," July 28, 2015.

5. The retirement unknown
Family
Government
Employer
Moving on, employers have been offering retirement plans ever since American Express Company, a railroad freight forwarder, introduced the first U.S. private pension plan in 1875 to promote a stable, career-oriented workforce. Source: Steven A. Sass: The Promise of Private Pensions: The First Hundred Years (Cambridge, MA Harvard University press 1997) p. 23
These pension plans or defined benefit plans became more and more common during the 20th century and by 1970 , 45% of all workers were covered by this type of employer retirement plan.
Source: Steven A. Sass: The Promise of Private Pensions: The First Hundred Years (Cambridge, MA Harvard University press 1997) p. 179

6. The retirement unknown
75.5
27.2
15.8
11.2
Millions
Defined contribution plans are slowly replacing benefit plans.
According to the Employee Benefit Research Institute, defined benefit plans have decreased 42% from 1975 to 2012 from 27.2 million to 15.8 million. And defined contribution plans have increased 574% during that same period from 11.2 million to 75.5 million.
This shift from DB to DC plans and the resulting shift of responsibility to employees has changed the landscape of retirement. The consequences of this trend for retirees are significant. Individuals must first accumulate sufficient assets in these accounts for their retirement. And second, manage the assets accumulated for retirement so as to not outlive them.
Employee Benefit Research Institute, Issue Brief, October 2014, No. 405.

7. The retirement unknown
Family
Government
Employer
Our Clients
So, what we’ve learned form this historical retrospective is that things are changing and the biggest change is that YOU will be responsible for the lion’s share of your retirement.

8. Why is this important?

11. Source: Burkenroad Reports/IMCA

12. Sequence of Returns BEHAVIOR Longevity Inflation Medical Expenses
The pursuit of happiness - Mt Everest Story
Medical Expenses
Taxes

13. SEQUENCE OF RETURNS RISK

14. BEHAVIOR RISK Returns of S&P 500
$57,515
(9.14% return)
$28,704
(5.41% return)
$12,011
(0.92% return)
$8,222
(-0.97% return)
$5,783
(-2.70% return)
$4,166
(-4.28% return)
$17,998
(2.98% return)
This chart shows the performance of a $10,000 investment between December 31, 1990 and December 31, 2010 when some of the best market days were missed.
This chart is for illustrative purposes only and does not represent the performance of any investment or group of investments.
Source: Prepared by J.P. Morgan Asset Management using data from Lipper. Returns are based on the S&P 500 Total Return Index, an unmanaged, capitalization-weighted index that measures the performance of 500 large-capitalization domestic stocks representing all major industries. Past performance is not indicative of future returns. An individual cannot invest directly in an index.

15. LONGEVITY RISK

16. INFLATION RISK

17. The New Retirementality
CSRS/FERS Annuity
Military Retired Pay
FEGLI
SGLI
LTC
Coverage
Medicare
Part D
MediGap
Insurance
Mortgage
Payoff
Rebalancing
Portfolio W4
Withholding
Income Limits on
Social Security
Estimated Income
Tax Filing
TSP Withdrawal
Survivor Benefits
Well, we believe that our clients might be going through something like that anxiety when it comes to their own retirement planning. (Begin clicking through labels)
As they look ahead to all of the insurance, withholding, social security limits, distribution requirements, and the like, they are quite likely to become overwhelmed just like an airplane passenger looking into the cockpit.
What you’re in the position to do as a financial advisor is seek to provide them with confidence. You can provide them with your own version of the Flight Checklist. That idea takes us to our second principle.
College
Tuition
Penalty-free
Withdrawals
IRA
Rollover
Required
Distributions
For illustrative purposes only.

18. Chaos to Order = Confidence
Simply put, it’s likely that many of your clients look at the complexity of planning for the years ahead as complete chaos. If you can help them change that phenomenon, and morph the chaos into order, you are likely to provide them with confidence. It’s been said that selling is nothing more than the transfer of confidence.
Our next tool for you to make this principle a practical reality is something we call the Lifeline. (Make sure attendees have lifelines in front of them.)

19. Choosing the Right Words
Simply put, it’s likely that many of your clients look at the complexity of planning for the years ahead as complete chaos. If you can help them change that phenomenon, and morph the chaos into order, you are likely to provide them with confidence. It’s been said that selling is nothing more than the transfer of confidence.
Our next tool for you to make this principle a practical reality is something we call the Lifeline. (Make sure attendees have lifelines in front of them.)

21. Don’t use “managing longevity risk”
Replace this with “making sure you have enough money as long as you live”
Simply put, it’s likely that many of your clients look at the complexity of planning for the years ahead as complete chaos. If you can help them change that phenomenon, and morph the chaos into order, you are likely to provide them with confidence. It’s been said that selling is nothing more than the transfer of confidence.

23. Don’t use “manage inflation risk”
Instead discuss how you will help them maintain their lifestyle in later years.

24. Don’t use “manage market risk”
Client’s respond better to “participate in the gains while reducing the downside risk”

25. Don’t use the word “product”
It means “sales” to the average client. Instead talk about security and independence in retirement

26. They prefer to hear “protected”
The word “guaranteed” has been so diluted clients do not believe it anymore.
They prefer to hear “protected”

28. Avoid using the term “financial solution”
Use “financial strategy”. Solution implies the client has problems

29. Don’t promise the “dream” retirement.
Clients don’t want to feel like they are being sold and prefer to have a “comfortable” retirement

31. They want “works as advertised”
Client’s don’t want to hear they are getting something “new and improved”
They want “works as advertised”

34. “THE GREAT TRANSITION”

35. The retirement known Market volatility Longer retirement Inflation
So, there are many things we know about retirement:
We will probably live longer in retirement than our parents.
And we will all experience market volatility and inflation just as we did when we were saving for retirement but now, the impact to our income is significant.
And finally, our spending habits will probably change.
Change in spending

36. The retirement unknown
So let’s move into a discussion of retirement unknowns.

37. SOCIAL SECURITY INCOME Individual retirement savings
The retirement need
SOCIAL SECURITY INCOME
PENSION INCOME
PORTFOLIO INCOME
LIFETIME INCOME
And it looks something like this:
Social Security—delivers lifetime income but will we get our full due?
Employer traditional pension plans deliver lifetime income but how many of us have one of those these days?
What’s more likely is that we have IRAs and 401(k)s and 403(b)s for retirement. All of these arrangements are subject to the ups and downs of the market—market interest rates and equity performance. We know what that means—they’re subject to market volatility and the sequence of return risk we covered earlier.
What’s the answer to this?
Our retirement need is for more lifetime income -- to replace what we lost when traditional pensions were replaced by 401(k) plans and IRAs.
We need new ways of thinking about the need for lifetime income to replace what we’ve lost.
Government
Social Security
Employer Defined benefit (pension)
Individual retirement savings

38. Converting a portion of portfolio income to lifetime income
The retirement need
The new thinking:
Converting a portion of portfolio income to lifetime income
That’s what we mean by new thinking: Converting a portion of portfolio income to lifetime income.

39. COMFORT IN RETIREMENT: safety over return
77%
chose
4% return guaranteed not to lose value
COMFORT IN RETIREMENT: safety over return
8% return with possibility of losing value/ vulnerable to market downturn
23%
chose
But in reaction to the market drop, the 2015 Allianz research also found that Americans are finding comfort in retirement by focusing on guarantees.
Those surveyed describe comfort in tangible ways
They want safety (those surveyed chose either a hypothetical 8% return with market risks or a hypothetical 4% return and guaranteed not to lose value)
They describe comfort/guarantee are more important than upside potential
The Allianz Generations Apart study, 2015.

40. The retirement need We protect ... Our lives Our health Our houses
Our cars
We already protect:
Our lives
Our health
Our houses
Our cars
Why shouldn’t we be able to protect our retirement income?
Is there even a way to do this? Protect our retirement income?
Why not our retirement income?

41. The retirement need
You can protect a portion of your retirement income by using an annuity to convert portfolio income to lifetime income.
So, back to one of the key things you need to understand about protecting your retirement: Annuities offer you the ability to convert a portion of your portfolio income into guaranteed income for life. No other financial vehicle can offer that guarantee
Guarantees are backed by the financial strength and claims-paying ability of the issuing company. Variable annuity guarantees do not apply to the performance of the variable subaccounts, which will fluctuate with market conditions.

42. ALLIANZ
Allianz 222 with PIV RIder

43. ALLIANZ 222 with PIV RIDER
Benefits
Prospecting
How to Present

44. 2 ways to get an income increase: 2 ways to get a death benefit:
BenefitS
2 ways to get a bonus:
2 ways to get an income increase:
2 ways to get a death benefit:
Allianz 222 credits the Protected Income Value with a 15% premium bonus on all premiums received in the first year. The Protected Income Value also receives an interest bonus equal to 50% of the interest credited from the chosen allocations.
Clients can get annual lifetime withdrawal increases, based on earned interest and an interest bonus equal to 50% of the interest rate from their chosen allocation. Plus, they can double their withdrawal income if confined to an eligible hospital, nursing facility, or assisted living facility**.
The client's beneficiaries can receive the full accumulation value in a lump sum, or they can receive the full Protected Income Value as annuity payments over five years or more.
Sequence of Return Risk
Behavioral Risk
Longevity Risk
Inflation Risk
LTC Risk
Potential Legacy
Tax Risk

45. Prospecting Gtd., Increasing Income Year 11+ Ages 45-60
MUST HAVE THE ABILITY TO WAIT 10 YEARS
(If clients cannot wait 10 years the 222 can still be a fit if other assets exist to bridge the gap)
Looking to supplement pension, SS income with additional guarantees
Value downside protection but like upside potential through 50% interest bonuses
Increasing income to offset inflation valued
IT DOESN’T PAY TO WAIT!

46. Prospecting Spousal Survival Benefit Ages 55-65
MUST HAVE THE ABILITY TO WAIT 10 YEARS FOR INCOME (PIV DB available)
(If clients cannot wait 10 years the 222 can still be a fit if other assets exist to bridge the gap)
Looking to provide spouse with either a guaranteed income stream upon passing early or PIV DB paid out over 5+ years if passing away later
Confinement Doubler also provides surviving spouse with a form of LTC protection when more likely to be confined
If not needed then PIV DB can be passed to next generation over 5+ years

47. How to Sell it Begin with Benefits:
No cost
No downside risk on Accumulation Value due to market returns but some market upside based on market index (indices) chosen
15% PIV Premium Bonus
PIV grows by credited return on AV plus 50% Interest Bonus
Guaranteed Income for life (lives) that you cannot outlive
Income can increase overtime to offset inflation
Doubler if needed for confinement
Show them illustration to reiterate benefits

48. 15% Bonus

49. 50% Interest Bonus
15% Bonus
Can Double for Confinement

50. Paid over 5+ Years

51. A HEDGE AGAINST RISKS