1. Annuities In Retirement Planning For Joe and June

2. My Mission As a ChFC is to help people to do better in insurance, retirement and investment planning

3. Present Situation Joe (Mid. 40s) I.T. Manager Salary at $35,000/m June (Mid. 40s) Accountant Salary at $30,000/m Bob age 18 Bill age 14

4. Summary of Present Situation 1.Joe is an IT Manager at Salary of HK$35,000/m 2.June is an Accountant at Salary of HK$30,000/m 3.They own a resident in joint tenancy with $2,450,000 outstanding mortgage at floating rate of 2.5% and monthly repayment at $12,983 4.Joe has two mutual funds invested at current market value of $236,000 5.June has $100,000 fix deposit for interest accumulation 6.Their parents were passed away 7. The whole family have their own insurance policies 8. Education fund has been reserved

5. Basic Monthly Expenditures for the Lee’s Family in 2008/2009 - current Housing Cost Monthly Mortgage 12,983 Property (Rent & Rates) 1,300 Insurance 130 Utilities 1,500 Food, Household, etc Food 3,000 Household 2,500 Telephone 400 Personal Care 1,000 Clothing 1,000 Child Expenses Bob (Tuition fee & Traffic) 3,280 Bill (-ditto-) 5,400 Personal Expenses Monthly Joe (Including Transportation) 3,500 June (-ditto-) 3,000 Public Discretionary Entertainment 1,500 Gifts 200 Fees, books, etc 600 Vacations 2,500 Insurance Life & Disability Insurance 5,645 Health Insurance 714 Mortgage Insurance 1,274 Education Fund 2,031

6. Basic Monthly Expenditures for the Lee’s Family in 2008/2009 - Current Total Monthly Expense : HK$53,456 Monthly Surplus: HK$11,544

7. Basic Assumptions Agreed to Use in Planning 1.Checking A/C at $5,000 2.Joint Savings A/C with balance of $20,000 at 3% interest annually 3.Salary increments for both are expected 3% in annual increase 4.Expected 1% annual increase for rate, rent, utilities and maintenance on personal residence 5.Expected inflation rate of living expenses to be 3% per annum 6.Expected average annual return on MPF to be 6% 7.Expected average annual return on mutual funds to be 13% 8.Fixed deposit with current interest rate at 1.45% per annum

8. Client Objectives -To retire at Age 65 -To stay at the current house -To remain the basic lifestyle after retirement -Joe has no preference on investment tools -June wants an product for providing guaranteed income during retirement years

9. Facts to Compute Lifestyle Expenses for Retirement 1.Desired retirement age at 65 2.Expense method to be used for retirement income need 3.Expense of food and household to be reduced by 50% 4.Personal expense to be reduced by 40% after retired 5.Personal expenses of Bob & Bill to be vanished 6.Expense of vacation to be reduced by 40% after the children’s grown up 7.Premium for Life and Critical Illness Benefit to be paid up by Age 65; Disability Insurance and Accidental Benefit to be expired at Age 65 8.Payment for Mortgage Insurance to be paid up by age 65 9.Premium for education funds for Bob & Bill to be paid up by their Age 18 10. Future retirement monthly income to be needed $28,649 at Age 65

10. Basic Monthly Expenditures for the Lee’s Family in 2028/2029- Onset of Retirement Journey Housing Cost Monthly Mortgage 0 Property Taxes 1,586 Insurance 130 Utilities 1,830 Food, Household, etc Food 2,709 Household 2,258 Telephone 722 Personal Care 1,806 Clothing 1,806 Personal Expenses Monthly Joe (Including Transportation) 3,793 June (-ditto-) 3,251 Public Discretionary Entertainment 2,709 Gifts 361 Fees, books, etc 1,084 Vacations 2,709 Insurance Life & Disability Insurance 0 Health Insurance 1,895 Mortgage Insurance 0 Education Fund 0

11. Basic Monthly Expenditures for the Lee’s Family in 2028/2029 – Onset of Retirement Journey Total Monthly Expense : HK$28,649

12. Life Expectancy For male at Age 79.5 and female at Age 85.6 according to 2006 statistic from Hong Kong Government In reality, outlive of the table is very common

13. MPF Funds Investment Surplus of Monthly Income

14. Sources of Income – MPF MPF (@ 6% Growth) for Joe and June at Age 65 Joe HK$1,557,872 Jun HK$1,557,872 Total HK$3,115,744

15. Sources of Income – Funds Investment Projected Amount : HK$236,000 @ 13% annual return for 20 Years (i.e. Up to Your age 65) HK$2,719,449

16. Insurance to be kept in retirement Period Joe & June Permanent Life Protection (Estimated) Joe : HK$2,000,000 June : HK$1,000,000 Others Coverage benefit: Hospitalization & Surgical Benefit, Critical Illness Benefit

17. Choice of Annuity Products in Accumulation Period 1.Flexible Premium Deferred Fix Annuity 2.Flexible Premium Deferred Indexed Annuity 3.Flexible Premium Deferred Variable Annuity

18. Choice of Annuity Products in Accumulation Period Flexible Premium Deferred Fix Annuity Features: 1)Guaranteed interest rate 2)Lowest risk out of others 3)Capital Guaranteed. 4)Life payment with 15/20/25 Years certain

19. Choice of Annuity Products in Accumulation Period Flexible Premium Deferred Indexed Annuity Features:  Earning ties to outside index, expect higher return than fixed annuity.  Complicated products, not easy to understand

20. Choice of Annuity Products in Accumulation Period Flexible Premium Deferred Variable Annuity features: 1)Owner with choice of annuity fund 2)Owner assume the investment risks which is the highest out of the others 3)No Capital guaranteed.

21. Options available: Under Fixed Annuity (1) 1.1 Finance the full income with the fixed annuity 1.2 Finance partial income with the fixed annuity 1.3 Finance a minimum portion of income with the fixed annuity Under Variable Annuity (3) 3.1 Finance the full income with variable annuity 3.2 Finance partial income variable annuity

22. Recommendation: It is recommended to adopt 1.2 1.50% of monthly retirement income sponsored by Fixed annuity with HK$10,000 per month contribution as from today 2.50% of monthly retirement income sponsored by the lump sum fixed annuity whereas the amount generated from MPF account

23. Recommendation: 3) Addition of COLA to tackle the inflation risk by using the balance of fund amounted to HK$2,652,183 in the account.