1. A Fresh Look at Your Retirement Plan by Your Name, CFP

2. A Fresh Look at Your Retirement Plan Recent market events compel us to review your retirement plan in a more realistic way After every market correction, we see that plans that were prepared using conventional retirement calculators, become irrelevant Retirement dreams seem to be pushed further and further away, especially after each market correction Copyright ©2009 Retirementoptimizer.com Inc.

3. A Fresh Look at Your Retirement Plan Before your retirement dreams turn into retirement nightmares, let’s review your retirement plan This time, I propose using a new tool that is significantly more innovative than other retirement calculators that we have been using This new retirement calculator uses an entirely different philosophy. It may change the way we look at retirement planning Copyright ©2009 Retirementoptimizer.com Inc.

4. A Fresh Look at Your Retirement Plan All conventional retirement calculators make a FORECAST using certain assumptions: average assumed portfolio growth rate average assumed inflation Copyright ©2009 Retirementoptimizer.com Inc.

5. A Fresh Look at Your Retirement Plan The following example shows the reality for three generation of retirees: The grandfather retires at the beginning of 1929 His son retires at the beginning of 1966 His grandson retires at the beginning of 2000 Copyright ©2009 Retirementoptimizer.com Inc.

6. A Fresh Look at Your Retirement Plan Each one starts with $1 million of retirement savings Each one needs $60,000 to take out annually Each one start his retirement at age 65 We assume an annual portfolio growth rate of 8% We assume an inflation rate of 3% per year Let’s see what happens to their retirement dreams: Copyright ©2009 Retirementoptimizer.com Inc.

7. Standard Retirement Plan GREAT! I will have sufficient money for retirement Copyright ©2009 Retirementoptimizer.com Inc.

8. A Fresh Look at Your Retirement Plan The forecast looks fantastic! Let’s do a Reality Check Copyright ©2009 Retirementoptimizer.com Inc.

9. 1929 Wow! Nice Bull Market! Time to Retire! Grandfather retires in 1929 Copyright ©2009 Retirementoptimizer.com Inc.

10. 1/1/1938 1/1/1929 Grandfather is broke 9 years later! Copyright ©2009 Retirementoptimizer.com Inc.

11. Wow! Nice Bull Market! Time to Retire! 1966 His son retires in 1966 Copyright ©2009 Retirementoptimizer.com Inc.

12. 1/1/1966 1/1/1979 The son is broke 13 years later! Copyright ©2009 Retirementoptimizer.com Inc.

13. Wow! Nice Bull Market! Time to Retire? 1/1/2000 The grandson retires in year 2000 Copyright ©2009 Retirementoptimizer.com Inc.

14. The grandson will be likely broke only 12 years later! Age: 65 Age: 77 Copyright ©2009 Retirementoptimizer.com Inc.

15. A Fresh Look at Your Retirement Plan In the real world, it does not matter how accurate your assumptions are for your forecast. What matters is the SEQUENCE OF RETURNS that you experience during the early years of your retirement. Copyright ©2009 Retirementoptimizer.com Inc.

16. Portfolio Life Depends on How Lucky You Are Sometimes, you might catch a bullish trend: You can have income for 40+ years More often than not, you don’t catch a bullish trend: Portfolio lasts about 15 years Copyright ©2009 Retirementoptimizer.com Inc.

17. A Fresh Look at Your Retirement Plan The retirement planning tool that I use, does not forecast anything. It does not require any assumptions or averages This new tool only uses the actual market history. This method of planning is called AFTCASTING Aftcasting shows you all possible outcomes based on actual market history since 1900 Copyright ©2009 Retirementoptimizer.com Inc.

18. Your Retirement Plan based on Actual Market History Copyright ©2009 Retirementoptimizer.com Inc.

19. A Fresh Look at Your Retirement Plan Now, you can decide in a much more informed way: When can you retire? How much do you need to save until retirement? How much you can spend after retirement? What strategies can you to use for lifelong income? How can you export the longevity, market and inflation risks to others? Copyright ©2009 Retirementoptimizer.com Inc.

20. A Fresh Look at Your Retirement Plan OUR GOAL: To determine your essential and discretionary expenses during your retirement To figure out when you can retire To create a personal pension for your essential expenses To minimize the luck factor for your retirement age To optimize your current portfolio to maximize return and minimize risk Copyright ©2009 Retirementoptimizer.com Inc.

21. A Fresh Look at Your Retirement Plan Let’s try this new tool and see how we can plan your retirement more realistically. Do you want to go ahead? Copyright ©2009 Retirementoptimizer.com Inc.

22. Disclaimer Otar Retirement Calculator (ORC), illustrates how a mix of asset classes (stocks, bonds, cash or inflation indexed bonds), or income classes (investment portfolio, immediate life annuity, variable annuity with or without guaranteed income), would have fared under historical market conditions, given your stated financial goals and your cash flow. It does not provide a prediction of your ability to meet your goals; rather, it merely reports the hypothetical outcomes that would have occurred in the past. ORC should not be used as the primary basis for any investment or tax-planning decisions. Results will vary in the future. ORC is not intended to predict the future value of actual investments or actual holdings in your portfolio. It is also not intended to predict the current and future value of actual lifetime income. Copyright ©2009 Retirementoptimizer.com Inc.

23. Seven Steps for Using ORC 1. Determine retirement income and expenses Use the “Retirement Income Cash Flow Worksheet and Budget” or your own worksheet. Spend as much time as needed to figure out these numbers as accurately as possible. Copyright ©2009 Retirementoptimizer.com Inc.

24. Seven Steps for Using ORC 2. Enter current information into ORC: Main Page: Current age, desired retirement age, current asset mix, the value of total assets earmarked for retirement, current level of savings (% of income or $/year), how much income required after retirement (% of preretirement income or $/year). Cash Flow Page: Any other income and expense information from Step #1. Observe the outcome, probability of depletion, etc. -If this is second opinion, enter the assumed growth rate and inflation in the existing plan into the comparative boxes on the main page. See if it is realistic. Copyright ©2009 Retirementoptimizer.com Inc.

25. Seven Steps for Using ORC 3. Asset Allocation - Optimize Asset Mix: Optimization of the asset mix is the easiest way of potentially improving the outcome. After optimization, observe the outcome, did it improve? - Is the optimum asset mix within your tolerable range? - Would you feel comfortable with this optimum asset mix ? If the answer is “yes” to both questions, change the asset mix to the optimum. Copyright ©2009 Retirementoptimizer.com Inc.

26. Seven Steps for Using ORC 4. Check the outcome: - Excellent: good news, skip to Step # 6 - Good, Adequate: must review annually or after major family or market events. But for the time being, skip to Step # 6 - Inadequate: needs work, go to Step # 5 Copyright ©2009 Retirementoptimizer.com Inc.

27. Seven Steps for Using ORC 5. Ask, input and analyze one question at a time: - Can you delay retirement? - Can you work part-time after retirement? - Can you live on less money? (Distinguish between ”Essential” versus “Required” expenses) - Can you save more money until retirement? - Do you expect an inheritance? - How does a guaranteed income product (SPIA or VA- GMWB or VA-GMIB) improve the outcome? - Would you consider selling your home at age __ and then renting? Copyright ©2009 Retirementoptimizer.com Inc.

28. Seven Steps for Using ORC 6. Income Allocation: Optimum pension creation Just like optimizing the asset allocation is important when creating wealth during the accumulation stage, optimizing the income allocation is important during distribution stage to minimize the luck factor. To reduce the effect of the luck factor, a “pension” needs to be created. - If the outcome is “Excellent” your investment portfolio already acts as your pension. Review annually. - Otherwise, you can crate that pension either through life annuities or variable annuities with GMWB or GMIB with lifelong income guarantees. Copyright ©2009 Retirementoptimizer.com Inc.

29. Seven Steps for Using ORC 7. Summarize and Present your Plan: - Print only what is necessary. I print usually only the the “Main” and “Cash Flow” pages for the base case, “Optimization” page if you are suggesting a change in the asset mix, and the “Main” page for all other scenarios. - Write your walk-through of questions, answers, scenarios - Ensure that there are no unanswered questions left - If you are handing over the plan to a client, follow your compliance rules. Copyright ©2009 Retirementoptimizer.com Inc.

30. Disclaimer Otar Retirement Calculator (ORC), illustrates how a mix of asset classes (stocks, bonds, cash or inflation indexed bonds), or income classes (investment portfolio, immediate life annuity, variable annuity with or without guaranteed income), would have fared under historical market conditions, given your stated financial goals and your cash flow. It does not provide a prediction of your ability to meet your goals; rather, it merely reports the hypothetical outcomes that would have occurred in the past. ORC should not be used as the primary basis for any investment or tax-planning decisions. Results will vary in the future. ORC is not intended to predict the future value of actual investments or actual holdings in your portfolio. It is also not intended to predict the current and future value of actual lifetime income. Copyright ©2009 Retirementoptimizer.com Inc.