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Life’s better when we’re connected TM Taking control of your retirement Defining and pursuing the life you want National Taiwan University Alumni Association.

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Presentation on theme: "Life’s better when we’re connected TM Taking control of your retirement Defining and pursuing the life you want National Taiwan University Alumni Association."— Presentation transcript:

1 Life’s better when we’re connected TM Taking control of your retirement Defining and pursuing the life you want National Taiwan University Alumni Association November 15 th, 2014 Life’s better when we’re connected®

2 2 Variable annuities are long-term investments designed to help meet retirement needs. A variable annuity is a contractual agreement where a client makes payments to an insurance company, which, in turn, agrees to pay out an income stream or a lump sum amount at a later date. Variable annuities typically offer (1) tax-deferred treatment of earnings; (2) a death benefit; and (3) annuity payout options that can provide guaranteed income for life. Variable annuity contract values will fluctuate and are subject to market risk including the possible loss of principal. There are contract limitations, fees and charges associated with variable annuities which include, but are not limited to mortality and expense risk charges, sales and surrender charges, administrative fees, charges for optional benefits as well as charges for the underlying investment options. Early withdrawals may be subject to surrender charges, and taxed as ordinary income, and in addition, if taken prior to age 59 1/2 an additional 10% federal tax may apply. Withdrawals reduce annuity contract benefit, values and optional guarantees in any amount that may be more than the actual withdrawal. Past performance should not be a representation of future performance. Variable annuities are sold by prospectus only. Your Merrill Lynch financial advisor can provide you with more information, including a current prospectus. The current contract prospectus and underlying fund prospectuses contain more complete details on the investment objectives, risks, fees, charges and expenses, as well as other information about the contract and the underlying portfolios which should be carefully considered. Please read the prospectuses carefully before investing. Guaranteed Minimum Withdrawal Benefit (GMWB) Rider: A GMWB rider is an optional benefit that typically must be elected at issue if the owner(s)/annuitant(s) are within the age specifications as set forth in the contract rider and prospectus. GMWB riders are available for an additional charge (could be applied to the contract value or benefit base) and may be irrevocable once elected. GMWB riders guarantee a client can withdraw an annual amount (typically 4% to 7%) of their guaranteed protection amount (GMWB Base) for a certain period or for a lifetime (Lifetime GMWB). Lifetime GMWB riders may guarantee withdrawals for one or two lives (typically spouses). Typically the GMWB Base equals contributions made under the contract. The GMWB Base may accumulate at a minimum rate of growth of 5-7% for a specified period or until the first withdrawal, if sooner. Clients may also have the option to “step-up” the GMWB Base to the contract value after a specified waiting period (typically one year). The step-ups could also be automatic in some designs (typically on each contract anniversary). If the step-up occurs, terms, conditions and charges in effect at the time of the step-up may apply. Withdrawals that exceed the annual withdrawal limit may incur applicable surrender charges, negatively affect the GMWB Base, and reduce the contract value and death benefit. Typically any portion of the annual withdrawal limit not withdrawn during a contract year may not be carried over to the next contract year. Typically clients must allocate assets within specified investment options as set forth in the contract rider and prospectus. GMWB riders typically cannot be elected concurrently with any other living benefits.

3 3 For non-qualified and stand-alone qualified annuity contracts, annuitization must occur by the annuitant’s age 95 and at that date any Guaranteed Minimum Death Benefit (“GMDB”) will no longer apply. Clients should contact the issuing insurance company prior to the maturity date to discuss options including changing the annuitant, if permitted by the annuity contract. For custodially held qualified contracts, annuitization at age 95 may not be required. The material presented at this seminar should be regarded as educational Social Security information only and is not intended to provide specific advice. If you have questions regarding your particular situation, please contact your legal or tax advisor. Any tax statements contained herein were not intended or written to be used, and cannot be used for the purpose of avoiding U.S. federal, state or local tax penalties. Neither Merrill Lynch nor its financial advisors provide tax, accounting or legal advice. Clients should review any planned financial transactions or arrangements that may have tax, accounting or legal implications with their personal professional advisors. All annuity contract and rider guarantees, including optional benefits and any fixed subaccount crediting rates or annuity payout rates, are backed by the claims-paying ability of the issuing insurance company. They are not backed by Merrill Lynch or its affiliates, nor do Merrill Lynch or its affiliates make any representations or guarantees regarding the claims-paying ability of the issuing insurance company. by the claims-paying ability of the issuing insurance company. They are not backed by Merrill Lynch or its affiliates, nor do Merrill Lynch or its affiliates make any representations or guarantees regarding the claims-paying ability of the issuing insurance company. Merrill Lynch makes available products and services offered by Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”), a registered broker-dealer and member SIPC, and other subsidiaries of Bank of America Corporation (“BofA”). Merrill Lynch Life Agency Inc. (“MLLA”) is a licensed insurance agency and a wholly owned subsidiary of BofA. Investment products offered through MLPF&S and insurance and annuity products offered through MLLA: © 2014 Bank of America Corporation. All rights reserved. | AR9NBN7F | 324104PM-0814 Are Not FDIC InsuredAre Not Bank GuaranteedMay Lose Value Are Not Deposits Are Not Insured By Any Federal Government Agency Are Not a Condition to Any Banking Service or Activity

4 4 THEN NOW Baby Boomers Accumulation Decumulation As Boomers entered the workforce: Government and employers promise to cover costs of retirement and healthcare for life As Boomers prepare for retirement: Individual responsibility and self-reliance Understanding the shifting dynamics Source: “Approaching 65: A Survey of Baby Boomers Turning 65 Years Old" Aarp.com (2010) Available at http://assets.aarp.org/rgcenter/general/approaching-65.pdf Baby Boomers

5 5 The top financial worries for retirement reflect the new realities Source: Americans’ Perspectives on New Retirement Realities and the Longevity Bonus Study, 2013 Lack of Company Pension Lack of Social Security Healthcare Expenses Outliving My Money Lack of Personal Savings 52% 34% 4% 6% 3%

6 6 What is the financial turning point and why is it so important? What are the basics of a sound retirement portfolio? How can Merrill Lynch help you take control of your retirement ? Today’s discussion

7 7 ACCUMULATION DECUMULATION TRANSITION Your life is a series of financial turning points Goals? Travel Relocate Volunteer Time with family Sources of Income? Social Security Pension 401(k) Annuities Turning Point College Tuition Marriage Children Home Purchase

8 8 Longevity Risk Inflation Risk Market Risk: Sequence of Returns Uncertainties abound Retirement Risks? Turning Point

9 9 58% 81% 31% Living longer: A double-edged sword 657585 AGE 95 The Society of Actuaries, 2000 Mortality Table Turning Point

10 10 Inflation risk Source: U.S. Bureau of Labor Statistics, Table 26, Average Annual Inflation for 2004 -2013 and Americans’ Perspectives on New Retirement Realities and the Longevity Bonus Study Average Annual Inflation Rates: 2004 – 2013 Turning Point 6.1% 3.5% 3.0%

11 11 Accumulation No Withdrawals Decumulation Withdrawing $50,000 a Year 24% 18% 14% 12% 8% 6% 4% -6% -8% -20% -8% -6% 4% 6% 8% 12% 14% 18% 24% $1 million after 10 years $1,538,846 24% 18% 14% 12% 8% 6% 4% -6% -8% -20% -8% -6% 4% 6% 8% 12% 14% 18% 24% $1,074,455$630,178 Source: Merrill Lynch Insured Solutions These charts are illustrative only. They do not reflect the return of any particular investment. Investment returns will vary. This is not based on actual performance. Market risk: Sequence of returns Turning Point

12 12 Manage risk yourself Transfer risk to an insurance company Strategies to address risk Asset allocation and portfolio diversification do not assure a profit or protect against a loss in declining markets. All contract guarantees. including optional benefits, are based on the claims-paying ability of the issuing insurance company. Set aside extra retirement savings Purchase long-term care insurance Manage assets to keep up with inflation Purchase an annuity with guaranteed lifetime income Control retirement spending Turning Point

13 13 Understanding your retirement goals and setting priorities Help pursue my passions and interests Help my money last in retirement Discretionary Important Dining out, travel, a grandchild’s education Essential Healthcare, Housing, Food, Clothing, Gas Retirement Portfolio

14 14 Aligning your portfolio to your goals and priorities Systematic withdrawal plan Market-Linked Investments Bond Laddering Sustainable Income Predictable Income from Social Security and Pensions Guaranteed 1 Income from Annuities Retirement PortfolioDiscretionaryImportant Essential 1 All annuity contract and rider guarantees, including optional benefits and any fixed subaccount crediting rates or annuity payout rates, are backed by the claims-paying ability of the issuing insurance company. They are not backed by Merrill Lynch or its affiliates, nor do Merrill Lynch or its affiliates make any representations or guarantees regarding the claims-paying ability of the issuing insurance company.

15 15 Systematic withdrawal plan AgeMaleFemaleCouple 553.0%2.9%2.8% 603.3%3.2%3.0% 653.7%3.5%3.4% 704.2%4.0%3.8% 754.8%4.6%4.4% 805.6%5.4%5.2% Retirement Portfolio 95% confidence level Annual withdrawal 1 1 Hypothetical illustration based on IMG research. Adjusted for inflation. Capital market assumptions used in analysis as of July 2011 are as follows: U.S. Stocks is based on the S&P 500 Index – expected return 9.5%, expected volatility 18.0%, expected fees 1.5%. U.S. Bonds is based on Ibbotson U.S. Intermediate Government Bond Index – expected return 5.3%, expected volatility 6.1%, expected fees 1.5%. U.S. Cash is based on 1 month Treasury Bills – expected return 3.0%, expected volatility.9%, expected fees.5%.

16 16 Bond Laddering As the bonds mature, money is reinvested on the long-end to maintain the maturity structure 13 years 12 years 11 years 3 years 2 years 1 year 1-year bond 2-year bond 3-year bond 10-year bond Continue to reinvest as bond matures Retirement Portfolio 1-yr bond matures; reinvest in 10-yr bond 2-yr bond matures; reinvest in 10-yr bond 3-yr bond matures; reinvest in 10-yr bond

17 17 Market-Linked Investments Retirement Portfolio Market-Linked Investments Downside risk protection Solid upside potential Capital preservation and downside protection Growth potential Enhanced diversification Benefits May underperform bonds Don’t pay dividends Can lose value if not held to maturity Payments are subject to the credit risk of the issuer Considerations Market-Linked Investments may not be suitable for all investors. Since Market- Linked Investments have varying payout characteristics, risks and rewards, you need to understand the characteristics of each specific investment, as well as those of the linked asset.

18 18 Market Index Target-Term Securities (MITTS) Market-Linked Investments that offer downside protection if held to maturity. Hypothetical information is not a projection of future returns. S&P 500 return does not include dividends. If the S&P 500 falls 30%, you still get back your principal. If the S&P 500 rises 30%, MITTS return 30% If the S&P 500 rises 70%, MITTS return 50% Retirement Portfolio

19 19 You make a payment to insurance company You receive an income stream or lump sum Tax-deferred accumulation of earnings Guaranteed death benefit Guaranteed lifetime income for essential goals Annuities Retirement Portfolio

20 20 By applying principal from those who die early to those who die later, an insurance company is able to offer more income to each investor and guarantee that money for life. How can annuities achieve higher income levels? Survivorship Credits “Annuities are an instrument uniquely suited to hedging the risk of outliving one’s wealth.” Merrill Lynch Investment Management & Guidance Retirement Portfolio

21 21 Variable Annuity + Living Benefit Fixed Indexed Annuity + Living Benefit Income Annuity Level of Lifetime Income Understanding the trade-offs to find the right annuity for you Trade-Offs Investment flexibility and Asset control Liquidity ✔ ✔ Possible investment upside ✔ ✔ (capped) Possible income upside ✔ Guaranteed lifetime income ✔ ✔ ✔ Retirement Portfolio

22 22 4.2% 1 Hypothetical illustration based on IMG research. Adjusted for inflation Capital market assumptions used in analysis as of July 2011 are as follows: U.S. Stocks is based on the S&P 500 Index – expected return 9.5%, expected volatility 18.0%, expected fees 1.5%. U.S. Bonds is based on Ibbotson U.S. Intermediate Government Bond Index – expected return 5.3%, expected volatility 6.1%, expected fees 1.5%. U.S. Cash is based on 1 month Treasury Bills – expected return 3.0%, expected volatility.9%, expected fees.5%. 80% Achievable Spending Rate Probability of Success Couple, both age 65 What if an 80% chance of success isn’t good enough? Hypothetical example: Systematic withdrawal plan 1 Retirement Portfolio

23 23 95% 4.2% 3.4% 1 Hypothetical illustration based on IMG research. Adjusted for inflation. 80% Achievable Spending Rate Probability of Success Couple, both age 65 What if a 3.4% withdrawal rate isn’t enough income? Hypothetical example: The trade-off between spending and probability of success 1 X X Retirement Portfolio

24 24 95% 4.2% 3.4% Guaranteed Lifetime Income 1 4.5% 80% Achievable Spending Rate Probability of Success Couple, both age 65 Hypothetical example: An annuity can produce more income and higher confidence X X X X 1 All annuity contract and rider guarantees, including optional benefits and any fixed subaccount crediting rates or annuity payout rates, are backed by the claims-paying ability of the issuing insurance company. They are not backed by Merrill Lynch or its affiliates, nor do Merrill Lynch or its affiliates make any representations or guarantees regarding the claims-paying ability of the issuing insurance company. Hypothetical illustration assuming a variable annuity with a guaranteed minimum withdrawal benefit of 4.5% and assumes no excess withdrawals. Withdrawals reduce annuity contract benefits, values and optional guarantees in an account that may be more than the actual withdrawal. Annuity withdrawal is not adjusted for inflation, but could increase if the annuity’s investments perform well. Optional benefits are available at an additional cost. It is possible to lose money in a variable annuity purchased with an optional protection rider. Optional riders may be irrevocable and expire without use. “Allocating a portion of a retirement portfolio to an annuity can reduce a retiree’s risk of running out of money and increase his or her potential lifetime income.“ Merrill Lynch Investment Management & Guidance Retirement Portfolio

25 25 Projected Income $122,600 Annual Income Target $105,000 Hypothetical Case study Retirement Portfolio Discretionary $15,000 Important Essential $60,000 $30,000 Income Sources Predictable / Guaranteed Non- Guaranteed Social Security and Pension $43,000 $700,000 Variable Annuity (4.5% GLWB) $31,500 $500,000 Laddered Bond Portfolio (3.5%) $17,500 $900,000 Systematic WP (3.4% draw-down) $30,600 TOTAL$74,500$48,100 Mark (63) and Emily (62), married and both planning to retire in 5 years $2.1 million in assets Ultra-conservative investors and risk averse; worried about inflation Projected annual income need: $105,000 For illustrative purposes only. Does not represent an actual investment.

26 26 Comparing different types of income sources Does it address the risks? Longevity? Inflation? Market? Is it flexible enough to meet your needs? How liquid is it? What is the growth potential? What are the costs? Is the income guaranteed or predictable? Retirement Portfolio

27 27 A guided approach that is tailored to your unique goals How can Merrill Lynch help?

28 28 How can Merrill Lynch help? Education, insights and resources to help you clarify your goals and make informed choices Global research Investment guidance Investment options Planning and investment tools Merrill Lynch financial advisor Merrill Lynch and Bank of America Financial Specialists Collaboration with your current advisors

29 29 Next steps Discuss and prioritize your goals Estimate your expenses and identify sources of income in retirement Discuss aligning goals to income sources based on your priorities Merrill Lynch can help

30 30 What is the Financial Turning Point and why is it so important? What are the basics of a sound retirement portfolio? How can Merrill Lynch help you take control of your retirement ? Today’s discussion

31 Take action today with a personal consultation. Joseph S. Grieco (516) 498-3345 joseph.grieco@ml.com

32 Life’s better when we’re connected®


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