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For Producer or Broker/Dealer Use Only. Not for Public Distribution.

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Presentation on theme: "For Producer or Broker/Dealer Use Only. Not for Public Distribution."— Presentation transcript:

1 For Producer or Broker/Dealer Use Only. Not for Public Distribution.

2 2 A 2 nd White paper commissioned by MetLife First paper: “Retirement Income and the Sensitive Sequence of Returns” Second paper: “Retirement Income: The Role of Product Allocation in Sustaining Retirement Income” Moshe A. Milevsky, Ph.D. – Associate Professor of Finance at the Schulich School of Business at York University – Executive Director of The IFID Centre and CEO of the QWeMA Group, Inc., in Toronto, Canada.

3 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 3 What we’ll be discussing Asset allocation vs. product allocation Why product allocation? Clients’ financial challenges and goals The products that can help them insure against risks How to decide on a product allocation strategy Hypothetical case studies

4 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 4 In retirement, product allocation matters most VS Pre-retirement R.O.A. (Return on Assets) Asset allocation matters most! Retirement R.O.I. (Reliability of Income) Products matter most!

5 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 5 Why use a product allocation strategy? Reduce risks Maximize income Sustain income throughout lifetime Maintain some liquidity Satisfy legacy needs To help:

6 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 6 Transitioning to retirement… The challenges, the goals The Goals Liquidity Staying the Course Legacy Planning The Challenges Longevity Risk Inflation Risk Sequence of Returns Risk

7 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Longevity Risk Male: age 65, has a 50% chance of living to age 85 Female: age 65, has a 50% chance of living to age 88 Couple: both age 65, have a 50% chance of at least one person living to age 92 Source: Annuity 2000 Mortality Table, Society of Actuaries

8 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 8 Inflation Risk

9 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 9 Sequence of Returns Risk These examples are hypothetical and are for illustrative purposes only. It is not meant to represent performance of any particular investment. These examples are meant to demonstrate the impact of the sequence of returns, assuming annual withdrawals of $50,000 (initially 5% of the account value). Withdrawal charges would apply if withdrawals exceed the contract’s annual free withdrawal amount. If the taxpayer has not attained age 59 1/2 at the time of the distribution, the portion of the withdrawals that is subject to income tax may also be subject to a 10% Federal income tax penalty. These hypothetical illustrations do not take into account premium taxes. These examples do not take into account any fees or charges that may be associated with a particular product.

10 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 10 Insuring against risks…achieving goals Variable Annuities Income Annuities SWPs from Traditional Investments

11 For Producer or Broker/Dealer Use Only. Not for Public Distribution. A Product Spectrum 11 Real Estate Investment Trusts International Stocks U.S. Stocks Mutual Funds Managed Platforms Variable Annuities Indexed Annuities Bonds Fixed Annuities Cash Aggressive Conservative

12 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 12 SWPs from traditional investments Several investment choices Investments tend to be very liquid Investor has control of withdrawals Easy for investor to change things No guarantees No protection against market declines No incentive to stay the course

13 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 13 VAs with Guaranteed Living Benefits Liquidity somewhat restricted; some withdrawals allowed. Provide guaranteed income for life Offers step-ups or minimum percentage increases and a diversified mix of investment options, including equities Offer protection from market declines Help investors stay the course Optional living benefit riders are available for an additional annual charge and are subject to state, broker/dealer and product availability. See prospectus for complete details. Guarantees apply to certain insurance and annuity products, including optional benefits, (not securities, variable or investment advisory products) and are subject to product terms, exclusions and limitations and the insurer’s claims-paying ability and financial strength.

14 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 14 Income Annuities Pays out steady, generally fixed income for life Payments are guaranteed regardless of market declines Payments are generally fixed therefore don’t keep up with inflation Investor doesn’t have control Payout rate is fixed and initial payment is irreversible All guarantees are based on the claims-paying ability and financial strength of the issuing insurance company.

15 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 15 Comparing effectiveness in managing risks Moshe A. Milevsky, Ph.D.: “ Retirement Income: The Role of Product Allocation in Sustaining Retirement Income”

16 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 16 Comparing effectiveness in achieving goals Moshe A. Milevsky, Ph.D.: “ Retirement Income: The Role of Product Allocation in Sustaining Retirement Income”

17 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 17 Annuity Benefits may outweigh the costs Income annuities tend to have the least amount of out of pocket costs SWPs from Traditional investments (stocks, bonds, etc.) vary in cost Variable Annuities with living benefits have higher costs to account for their guarantees and protection features –Income Benefits –Death Benefits

18 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 18 Clients need all three! SWPs from Traditional Investments Variable Annuities Income Annuities Variable Annuities Income Annuities SWPs from Traditional Investments

19 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 19 Deciding on a product allocation for your client Have your client fill out a questionnaire – here is a sample

20 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 20 Product Allocation: Hypothetical Case Study #1 Meet Denise 62 years old. Ready to retire from her job. Plans to travel with her husband, who is already retired. Will receive inflation-adjusted defined benefit pension. Additional $1 million to invest. Needs an annual income of $55,000 (5.5%) and wants to leave a portion to her beneficiaries. This hypothetical case study is for illustrative purposes only and should not be viewed as actual investment and/or insurance recommendations.

21 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 21 Denise’s retirement priorities

22 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 22 Denise’s hypothetical product allocation The product allocation percentages are a result of using QWeMA proprietary methodology called Product Allocation for Retirement Income (PRARI). These allocations are not to be considered investment or financial advice or recommendation for purchase of any MetLife product.

23 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 23 Product Allocation: Hypothetical Case Study #2 Meet Ava 62 years old. Has an IRA account of $750,000 plus modest Social Security payments. Would like an inflation-adjusted income of $39,000 per year upon retirement. Hopes to leave a portion of her assets to her son. This hypothetical case study is for illustrative purposes only and should not be viewed as actual investment and/or insurance recommendations.

24 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 24 Ava’s retirement priorities

25 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 25 Ava’s hypothetical product allocation The product allocation percentages are a result of using QWeMA proprietary methodology called Product Allocation for Retirement Income (PRARI). These allocations are not to be considered investment or financial advice or recommendation for purchase of any MetLife product.

26 For Producer or Broker/Dealer Use Only. Not for Public Distribution. 26 Product allocation may help sustain income All three product categories offer benefits: –Protection against risks –Help in achieving financial goals There are tradeoffs All three categories combined can help your clients sustain retirement income Talk to your clients about their priorities MetLife Sales Desk:

27 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Prospectuses for variable annuities issued by a MetLife Investors insurance company and for the investment portfolios offered thereunder, are available from MetLife Investors. The contract prospectus contains information about the contract’s features, risks, charges and expenses. The investment objectives, risks and policies of the investment options, as well as other information about the investment options, are described in their respective prospectuses. Clients should read the prospectuses and consider this information carefully before investing. Product availability and features may vary by state. Please refer to the contract prospectus for more complete details regarding the living and death benefits. Variable annuities are long-term investments designed for retirement purposes. MetLife Investors variable and fixed annuities have limitations, exclusions, charges, termination provisions and terms for keeping them in force. There is no guarantee that any of the variable investment options in this product will meet their stated goals or objectives. The account value is subject to market fluctuations and investment risk so that, when withdrawn, it may be worth more or less than its original value. All contract and rider guarantees, including optional benefits and any fixed account crediting rates or annuity payout rates, are backed by the claims-paying ability and financial strength of the issuing insurance company. MetLife Investors Fixed Annuities, like all annuities, are insurance products and are not insured by the FDIC, the NCUSIF or any other government agency, nor are they guaranteed by, or the obligation of, the financial institution that sells them. Important Information

28 For Producer or Broker/Dealer Use Only. Not for Public Distribution. Withdrawals of taxable amounts are subject to ordinary income tax and if made before age 59½, may be subject to a 10% Federal income tax penalty. Withdrawals will reduce the living and death benefits and account value. Withdrawals may be subject to withdrawal charges. The information contained in this document is not intended to (and cannot) be used by anyone to avoid IRS penalties. This document supports the promotion and marketing of insurance or other financial products and services. Clients should seek advice based on their particular circumstances from an independent tax advisor since any discussion of taxes is for general informational purposes only and does not purport to be complete or cover every situation. MetLife, its agents, and representatives may not give legal or tax advice. Any discussion of taxes herein or related to this document is for general information purposes only and does not purport to be complete or cover every situation. Tax law is subject to interpretation and legislative change. Tax results and the appropriateness of any product for any specific taxpayer may vary depending on the facts and circumstances. You should consult with and rely on your own independent legal and tax advisors regarding your particular set of facts and circumstances. Variable and fixed annuities are issued by MetLife Investors USA Insurance Company; Charlotte, NC and in New York, only by First MetLife Investors Insurance Company, New York, NY All variable products are distributed by MetLife Investors Distribution Company (member FINRA), New York, NY PEANUTS © 2014 Peanuts Worldwide LLC BDVA8827 L [1114][xGU,MP,VI] Not A Deposit Not FDIC-Insured Not Insured By Any Federal Government Agency Not Guaranteed By Any Bank Or Credit Union May Go Down In Value Important Information

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