1. Sales Ideas for Life Insurance Awareness Month
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SEPTEMBER 2016

2. Welcome Sarah Molitor Stoyan Petev Steve Schreiber
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3. Minimizing the Sequence of Returns Risk September 2016
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4. 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.
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5. Practical Life Insurance Ideas
Stoyan Petev, CFA, CFP, CLU, ChFC
VP of Advanced Designs
First Heartland Companies

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

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

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

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

10. Sequence of Returns - Distribution
Bur it matters during distribution:

11. Case Study 1

12. Case Study 1 – Option B

13. Are You Asset- and Income-Diversified?

14. Life Insurance As an Alternative Asset Class – Case Study 2

15. Life Insurance As an Alternative Asset Class – Case Study 2

16. 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

17. 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)

18. Managed Money and Sequence of Returns Risk

19. 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?

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

21. 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%

22. 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%

23. 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

24. 80% Managed Money 80% of the account remains as AUM
20% is used to purchase indexed UL

25. 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

26. 20% Life Insurance

27. 20% Life Insurance

28. 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

29. Stoyan
Questions for us?
Steve