GROW YOUR RETIREMENT INCOME EVERY DAY with Highest Daily Lifetime Income v3.0

Transcription

1 GROW YOUR RETIREMENT INCOME EVERY DAY with Highest Daily Lifetime Income v3.0 Profile Joe and Mary Smith Age: 62 Both plan to retire in 5 years Retirement Income Sources: 401(k)s Personal savings Social Security Retirement Goals: Opportunities to grow retirement income Protect future retirement income from potential market downturns Create a retirement income stream that will last as long as they live THE SMITHS CHALLENGE With retirement approaching, Joe and Mary have been reviewing their investments to be sure they are on track to meet their financial goals. Recently they ve been discussing consolidating their 401(k)s into one investment, with the goal of increasing their income during retirement. With 2008 still fresh in their minds, the Smiths are searching for a way to increase their retirement income and also protect it. To find out if there is a way to satisfy their goals, they make an appointment with their financial professional. Are the Smiths at risk of running out of money during retirement? Although the Smiths have accumulated a significant nest egg, their financial professional is concerned they could be at risk of running out of money during retirement. He points out that the Smiths should prepare for a retirement that could last 30 years or more. He also points out that other retirement challenges like inflation, taxes and healthcare costs could deplete their savings more quickly than they might have anticipated. Workers typically need to accumulate retirement assets and benefits (not including Social Security) worth about 11 times their pay at retirement at age 65 to maintain their preretirement standard of living over an average life expectancy. Aon Hewitt: The Real Deal: 2015 Retirement Income Adequacy at Large Companies Issued by Pruco Life Insurance Company and by Pruco Life Insurance Company of New Jersey. This material must be preceded or accompanied by a current variable annuity product prospectus that includes any applicable monthly rate sheet supplement and the applicable variable annuity summary card Ed. 09/2016

2 With Highest Daily Lifetime Income, the Smiths guaranteed income continues to grow, every day. Highest Daily Lifetime Income provides Joe and Mary with daily opportunities to lock in annuity highs and immediately begin growing those highs at an annual compounded rate, for retirement income purposes (referred to as the Protected Withdrawal Value or PWV). As the chart below demonstrates, no matter how the market performs, the basis for Joe and Mary s retirement income continues to grow, every day, until they are ready to begin taking Lifetime Withdrawals five years later, at age 67. HOW DAILY LOCK-INS AND IMMEDIATE DAILY GROWTH WORK Every day that the Smiths account value (AV) reaches a new high, that amount is locked in for retirement income purposes AND IMMEDIATELY BEGINS growing at an annual compounded rate for the first 10 years or until they begin receiving Lifetime Withdrawals, whichever comes first* $485,935 $472,394 $350,000 HIGHEST DAILY BENEFIT SUMMARY Highest s: 40 Initial Annual Income Amount: $17,500 Annual Income Amount at first Lifetime Withdrawal: $24,297 Year 1 Year 2 Year 3 Year 4 Year 5 (Assumes no withdrawals are taken) Protected Withdrawal Value (PWV) Account Value (AV) with HD Lifetime Income Highest s Immediate Compounded Growth * Tomorrow s PWV will be the greater of today s account value (AV) and today s PWV, plus one day s worth of annual interest. This is a hypothetical example for illustrative purposes only. It does not reflect a specific annuity, an actual account value, or the performance of any investment. The example above assumes a 5% annual compounded growth rate and a 5% annual withdrawal rate. Your client experience may vary based on when the annuity and benefit were purchased, the annuity and Highest Daily benefit you select, and the asset allocation portfolios you choose. Please see page 4 for additional information regarding this example. It s important to note that the PWV is only used to calculate the guaranteed lifetime income and the charge for the benefit fee. It is separate from the account value and is not available as a lump sum withdrawal. Please note that lock-ins do not apply to the account value. The account value is not guaranteed, can fluctuate, and may lose value. All share classes may not be available to all broker/dealers. 2/6 HDI Case Study

3 A snapshot of the Smiths Highest Daily experience. The calendar below is a hypothetical snapshot from the chart on page 2. It highlights Joe and Mary s Highest Daily experience during month six of year two of their investment. As you can see, the Smiths PWV is growing each day, whether it is locking in new daily highs or growing the most current Highest Daily lock-in at an annual compounded rate, for income purposes. This means that Joe and Mary s income is always growing during the month, regardless of whether their account value (AV) goes up or down. MONDAY TUESDAY WEDNESDAY THURSDAY FRIDAY DAY 1 DAY 2 DAY 3 DAY 4 DAY 5 PWV: $403,693 PWV: $403,746 PWV: $403,800 PWV: $403,854 PWV: $403,908 AV: $399,494 AV: $403,695 AV: $402,702 AV: $402,682 AV: $402,988 DAY 8 DAY 9 DAY 10 DAY 11 DAY 12 PWV: $404,228 PWV: $404,857 PWV: $404,912 PWV: $404,966 PWV: $406,097 AV: $404,228 AV: $404,857 AV: $404,513 AV: $404,170 AV: $406,097 DAY 15 DAY 16 DAY 17 DAY 18 DAY 19 PWV: $406,687 PWV: $406,742 PWV: $407,946 PWV: $408,899 PWV: $409,204 AV: $406,687 AV: $406,343 AV: $407,946 AV: $408,899 AV: $409,204 DAY 22 DAY 23 DAY 24 DAY 25 DAY 26 PWV: $409,423 PWV: $409,477 PWV: $409,532 PWV: $409,587 PWV: $409,751 AV: $403,611 AV: $401,647 AV: $401,627 AV: $403,826 AV: $405,061 DAY 29 DAY 30 DAY 31 PWV: $409,806 PWV: $409,861 PWV: $409,915 AV: $401,486 AV: $402,113 AV: $405,649 : Based on the investment performance of your annuity on any given calendar day, you ll have the opportunity to lock in your PWV at a higher amount than the previous day s value. This applies during the first 10 years, or until Lifetime Withdrawals begin. After 10 years, Highest Daily Lifetime Income benefits will continue to lock in your annuity s highest daily value as your PWV, until Lifetime Withdrawals begin. However, the daily compounded growth rate is no longer applied. : Unlike other benefits, Highest Daily compounds daily. The daily percentage of the annual compounded growth rate is applied to your most current Highest Daily lock-in. So whether you capture a new daily lock-in or not, your PWV is always growing for the first 10 years or until Lifetime Withdrawals begin. This is a hypothetical example for illustrative purposes only. It does not reflect a specific annuity, an actual account value, or the performance of any investment. The calendar illustrates how a variable annuity with Highest Daily Lifetime Income may perform over a one month period. The numbers illustrated above were chosen because they represent the best depiction of how highest daily lock-ins work in an up market and how immediate compounded growth works in down or volatile markets. For additional information regarding this example, please see page 4. 3/6 HDI Case Study

4 Put the power of Highest Daily to work for you. Like the Smiths, your retirement could be right around the corner, or it could be years away. Wherever you are on your retirement journey, you ll want to plan ahead to be sure you ll have enough money to live the lifestyle you ve envisioned. If you d like to increase your retirement income, but are concerned about market uncertainty, consider Highest Daily Lifetime Income, and take advantage of: Daily lock-ins AND immediate daily compounded growth for retirement income Protection of retirement income from market downturns A guaranteed income stream that will last through your retirement years A spousal option to ensure retirement income continues for two lives TALK TO YOUR FINANCIAL PROFESSIONAL Every situation is different. And the challenges of planning for retirement are different for everyone. Talk to your financial professional to find out if Highest Daily Lifetime Income is right for you. The hypothetical chart below helps illustrate how variable a annuity with the Highest Daily Lifetime Income benefit would perform even in a 0% gross return scenario. HIGHEST DAILY LIFETIME INCOME VARIABLE RETURN SCENARIO 11.3% GROSS RETURN SCENARIO 0% GROSS RETURN SCENARIO Year Annual Return Account Value Protected Withdrawal Value Account Value Protected Withdrawal Value Account Value Protected Withdrawal Value Initial $350,000 $350,000 $350,000 $350,000 $350,000 $350, % $367,942 $390,591 $371,512 $372,413 $337,160 $367, % $401,343 $419,601 $394,493 $395,449 $324,533 $385, % $398,791 $440,758 $419,043 $420,059 $312,103 $405, % $441,065 $462,796 $445,272 $446,350 $299,855 $425, % $472,394 $485,935 $473,294 $474,439 $287,775 $446,699 This hypothetical example is for illustrative purposes only, and includes the following assumptions: (i) a Variable Return Scenario illustrating an average portfolio fee of 1.07% for the Growth Model portfolio and the Bond Model portfolio (as of 12/31/2015); (ii) 11.3% and 6.7% average gross rates of return (6.3% combined average annual net rate of return) for the Growth Model portfolio and Bond Model portfolio respectively; (iii) an average annual gross rate of return for the Secure Value Account of 0.50% in years 1-10, and 1.00% in years 11+; (iv) 11.3% Gross Return Scenario illustrating a 6.3% average annual net rate of return; (v) 0% Gross Return Scenario illustrating a -3.9% average annual net rate of return; (vi) In the scenarios shown above, no money was transferred from the Growth Model Portfolio into the Bond Model Portfolio; (vii) Highest Daily Lifetime Income annual charge of 1.00%; and (vii) an annual insurance charge of 1.95% in years 1-9 and 1.45% in years 10+ of the contract, which reflects the cost of the Prudential Premier Retirement Variable Annuity C Series SM. Additionally, an Annual Maintenance Fee may be deducted on each annuity anniversary. The charge is the lesser of $50 ($30 in NY) or 2% of the account value. Other annuity products and investment portfolios may contain different expenses. Hence, the values illustrated would also be different. Please note that no movements into the AST Investment Grade Bond Portfolio occur for the 5-year time period shown. All share classes may not be available to all broker dealers. HDI Case Study 4/6

5 THE SMITHS STRATEGY A variable annuity with HIGHEST DAILY LIFETIME INCOME v3.0 To help ensure the Smiths do not outlive their retirement income, their financial professional suggests a variable annuity from Prudential companies. A variable annuity is a long-term investment designed to create income in retirement. The money is allocated to professionally managed investment portfolios that you select, where it accumulates tax-deferred. When you retire, your savings can be used to generate a stream of regular income payments that are guaranteed for as long as you live. In addition, variable annuities may provide a death benefit for your beneficiaries. Their financial professional also recommends that they combine their variable annuity with the optional Highest Daily Lifetime Income benefit. With this unique investment, the Smiths will enjoy opportunities for income growth, as well as protection of their future income from market downturns. The currently available Highest Daily Lifetime Income, available for an additional fee, is referred to as Highest Daily Lifetime Income v3.0 in the prospectus. Your financial professional can help you determine which annuity product, optional benefits and investment allocations may be appropriate for your retirement needs. Please read the prospectus for full details, including all fees and charges. The Highest Daily ANDvantage Highest Daily Lifetime Income is the only benefit that offers daily lock-ins AND immediate daily compounded growth. This means that no matter how the market performs, the basis for the Smiths retirement income is guaranteed to increase by the compounded growth rate until they begin taking Lifetime Withdrawals or 10 years from the time they elect the benefit, whichever is sooner. And the Smiths can choose from a wide range of investment options across four diverse strategies to help them meet their individual retirement goals. Find out how HIGHEST DAILY LIFETIME INCOME can help the Smiths: Grow their retirement income while protecting it from market downturns Create a guaranteed income stream that will last a lifetime Continue to receive the same guaranteed lifetime income stream even in the event that one of them passes away HDI Case Study 5/6

6 Investors should consider the features of the contract and the underlying portfolios investment objectives, policies, management, risks, charges and expenses carefully before investing. This and other important information is contained in the prospectus, which can be obtained from your financial professional. Please read the prospectus carefully before investing. Variable annuities are issued by Pruco Life Insurance Company (in New York, by Pruco Life Insurance Company of New Jersey), Newark, NJ (main office) and distributed by Prudential Annuities Distributors, Inc., Shelton, CT. All are Prudential Financial companies and each is solely responsible for its own financial condition and contractual obligations. Prudential Annuities is a business of Prudential Financial, Inc. Annuity contracts contain exclusions, limitations, reductions of benefits and terms for keeping them in force. Your licensed financial professional can provide you with complete details. All guarantees, including the benefit payment obligations arising under the annuity contract guarantees, rider guarantees, optional benefits, any fixed account crediting rates or annuity payout rates are backed by the claims-paying ability of Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey. Those payments and the responsibility to make them are not the obligations of the third party broker/dealer from which this annuity is purchased or any of its affiliates. All guarantees, including optional benefits, do not apply to the underlying investment options. A variable annuity is a long-term investment designed for retirement purposes. Investment returns and the principal value of an investment will fluctuate so that an investor s units, when redeemed, may be worth more or less than the original investment. Withdrawals or surrenders may be subject to contingent deferred sales charges. Withdrawals and distributions of taxable amounts are subject to ordinary income tax and, if made prior to age 59½, may be subject to an additional 10% federal income tax penalty, sometimes referred to as an additional income tax. Withdrawals reduce the account value and the living and death benefits, and the annual amount of living benefit available. Because qualified retirement plans, IRAs and variable annuities offer a tax-deferral feature, you should carefully consider the other features, benefits, risks, and costs associated with a variable annuity before purchasing one in either a qualified plan or an IRA. Before purchasing a variable annuity, you should take full advantage of your 401(k) and other qualified plans. The Highest Daily Lifetime Income v3.0 suite of benefits uses a predetermined mathematical formula to mitigate some of the financial risks we incur in providing the guarantees under the optional benefits through all market cycles. Each business day, the formula determines if any portion of your account value in the permitted subaccounts (asset allocation portfolios), including any DCA MVA options needs to be automatically transferred into or out of the AST Investment Grade Bond Portfolio (the Bond Portfolio ). Amounts transferred by the formula depend on a number of factors unique to your individual annuity and include: i. The difference between the account value and the Protected Withdrawal Value; ii. How long you have owned the benefit; iii. The amount invested in, and the performance of, the permitted subaccounts, the Bond Portfolio and the Secure Value Account and; iv. The impact of additional purchase payments made to and withdrawals taken from the annuity. The formula will not transfer amounts to or from the Secure Value Account. On any given day, no more than 30% of the account value in the permitted subaccounts (plus any DCA MVA options) may be transferred to the Bond Portfolio pursuant to the formula. Therefore, at any given time, some, most or none of the account value from the permitted subaccounts may be allocated to the Bond Portfolio. Transfers to and from the Bond Portfolio do not impact any income guarantees that have already been locked in. You may not allocate purchase payments or transfer account value into or out of the Bond Portfolio. The formula could mean that you miss opportunities for investment gains in the permitted subaccounts while amounts are allocated to the Bond Portfolio. The formula s allocation of amounts to the Bond Portfolio, however, could also protect your account value from losses that may occur in the permitted subaccounts. Please note: We are not providing investment advice through the formula. See the prospectus for complete details. The Protected Withdrawal Value is only used to calculate the guaranteed lifetime income and the charge for the benefit. It is separate from the account value and is not available as a lump sum withdrawal. The account value is not guaranteed, can fluctuate, and may lose value. We will automatically allocate 10% of each purchase payment to the Secure Value Account (SVA). You cannot make transfers into or out of the SVA. The SVA will earn interest daily at a crediting rate declared annually. Variable annuities offered by Prudential Financial companies are available at a total annual insurance cost of 0.55% to 1.95%, with an additional fee related to the professionally managed investment options. Note: All products may not be available through all third party broker/dealers. HD Lifetime Income v3.0 is available for an additional annual fee of 1.00% based on the greater of the account value and the Protected Withdrawal Value. Spousal HD Lifetime Income v3.0 is available for an additional annual fee of 1.10% based on the greater of the account value and the Protected Withdrawal Value. Your needs and suitability of annuity products and benefits should be carefully considered before investing. Optional living benefits may not be available in every state and may not be elected in conjunction with certain optional benefits. Optional benefits have certain investment, holding period, liquidity, and withdrawal limitations and restrictions. The benefit fees are in addition to fees and charges associated with the basic annuity. Withdrawals in excess of the Annual Income Amount impact the value of your benefit and can also affect the certainty of your income. An excess withdrawal occurs when your cumulative Lifetime Withdrawals exceed your Annual Income Amount in any annuity year. If an excess withdrawal is taken, only the portion of the Lifetime Withdrawal that exceeds the remaining Annual Income Amount will proportionally and permanently reduce your Protected Withdrawal Value and your Annual Income Amount for future years. If an excess withdrawal reduces the account value to zero, no further amount would be payable and the contract terminates Prudential Financial, Inc. and its related entities. Prudential Annuities, Prudential, the Prudential logo, the Rock symbol, and Bring Your Challenges are service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. Issued on contracts: P-BLX/IND(2/10), P-CR/IND(2/10), et al. or state variation thereof. Issued on forms: P-RID-HD(2/14), P-RID-HD(2/14)-NY ORD Ed. 09/2016 [Ref# ] 6/6 HDI Case Study