Solutions for the New Retirement Reality

Transcription

1 Solutions for the New Retirement Reality Fernando Suarez CFP, CLU, ChFC Managing Director - Wealth Management Advisor May 8 th, (10-11)

2 Disclosure The Northwestern Mutual Life Insurance Co.(NM), Milwaukee, WI (life insurance, annuities, disability insurance). Securities offered through Northwestern Mutual Investment Services, LLC, a subsidiary of NM and member of FINRA and SIPC. Northwestern Long Term Care Insurance Co., Milwaukee, WI (long term care insurance), a subsidiary of NM. All guarantees are backed solely by the claims-paying ability of the issuer.

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5 A New Reality Will you have enough money to enjoy retirement?

6 Reality Check What are clients saying? 94%: Understand Importance of Financial Security 48%: Feel Secure Your retirement security doesn t have to fluctuate with the markets. Source: Financial Realities: Changing Timeframes, March /April 2010, Harris Interactive, Paper copies available upon request

7 Two Essential Questions How much do I need? Where will that money come from? You can plan, build and achieve the retirement you deserve.

8 Quantifying Your Goals 46% The percent of American workers who have tried to calculate their retirement needs To make your vision reality, you have to know what it costs. The 2010 Retirement Confidence Survey: Confidence Stabilizing, But Preparations Continue to Erode, EBRI Issue Brief No. 340, March Paper copy furnished upon request.

9 Estimating Retirement Needs 85% 50%?? 80% 65% 75% 60% 70%? 55% 90%? How can you save if you don t know how much you ll need? Source: Rapidly Growing Medical Costs, Declining Pensions and Medical Subsidies, Longer Life Spans Make 401(k) Plans Critical Savings Vehicles for U.S. Employees, Regardless of Additional Sources of Income, Paper copy available upon request.??

10 Six Risks to Retirement Security Longevity risk Market risk Inflation and taxes Heath care costs Long-term care Legacy risk

11 Six Risks to Retirement Security Longevity Risk 50% 25% 10% 1% Male (65) Female (65) Couple (M/F 65) Most people underestimate how long they re likely to live. Based on 2000 Annuity Mortality Tables, Society of Actuaries

12 The Potential for Income You Can t Outlive Search for the keywords lifespan calculator on or

13 Six Risks to Retirement Security Market Risk The Sequence of Returns Can Significantly Affect Your Retirement Sequence of returns matters Actual historical return sequence Reversed historical return sequence Market risk can have a significant impact on your retirement. Past performance is no guarantee of future results. Hypothetical value of $500,000 invested at the beginning of 1973 and August Assumes inflation-adjusted withdrawal rate of 5%. Portfolio: 50% large-company stocks/50% intermediate-term bonds. This is for illustrative purposes only and not indicative of any investment. An investment cannot be made directly in an index Morningstar. All Rights Reserved. 3/1/2011

14 Six Risks to Retirement Security Inflation Erodes Purchasing Power Years 3% 4% 5% 0 $100,000 $100,000 $100,000 5 $86,000 $82,000 $78, $64,000 $56,000 $48, $48,000 $38,000 $30, $41,000 $31,000 $23,000 Inflation can take a significant bite out of your retirement income.

15 Six Risks to Retirement Security Health Care Costs The annual cost of health care in retirement $3,000 - $10,000* Health care costs can consume a significant portion of a retirement budget. Source: Copies available upon request.

16 Six Risks to Retirement Security Long-Term Care The national average annual cost of a semi-private room in a nursing home: $70,000* At 65, you have a 33 percent chance of entering a nursing home for at least three months.* *Munnell, Alicia H., et al, Long-Term Care Costs and the National Retirement Risk Index, Center for Retirement Research at Boston College, March 2009, Paper copy available upon request.

17 Six Risks to Retirement Security Legacy Risk Enjoying retirement and building a legacy aren t mutually exclusive goals.

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19 Two Essential Questions How much do I need? Where will that money come from? Understand all your sources of retirement income.

20 Can You Live on This? Average benefit from Social Security in 2010 $1,161/month* A vast majority 77% of Americans expect to receive at least some income from Social Security.** * Social Security Benefits for 2010; Lack of Increase First Since Paper copy available upon request. ** The 2010 Retirement Confidence Survey: Confidence Stabilizing, But Preparations Continue to Erode. Issue Brief 340, March Paper copy furnished upon request.

21 Not So Fast 56% 56% of Americans are counting on getting pension benefits 37% 37% actually participate in one Check with your Benefits Department to see if you qualify for a defined benefit or pension plan. *The 2010 Retirement Confidence Survey: Confidence Stabilizing, But Preparations Continue to Erode. Issue Brief 340, March Paper copy furnished upon request.

22 A Nation of Savers? You have lots of tools available to build your retirement savings. *The 2010 Retirement Confidence Survey: Confidence Stabilizing, But Preparations Continue to Erode. Issue Brief 340, March Paper copy furnished upon request.

23 When Will You Retire? 34% 34% of American workers plan to retire after age 65 Hope isn t a strategy. * Source: Newport, Frank, Americans Projected Retirement Age Continues to Creep Up. April 26, Paper copy available upon request.

24 Plan. Build. Achieve. Wealth Preservation and Distribution Wealth Accumulation Risk Management Retirement planning is a lifetime process.

25 Three Unifying Client Needs Having enough money to last through retirement Having a regular income stream in retirement Protecting their assets and their families from the costs of assisted care and disability Source: Retirement Income Redesigned/Master Plans for Distribution/An Advisor s Guide for Funding Boomers Best Years, Chapter 11: Withdrawal Strategies A Cash Flow Solution by Harold Evensky (recommends that clients maintain 2 years of expected cash flow in reserve)

26 Protecting What Matters Most

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28 The Power of Partnership Northwestern Mutual is dedicated to your success.

29 Your Opinion Counts Please complete and hand in form.

30 Disclosure The Northwestern Mutual Life Insurance Co.(NM), Milwaukee, WI (life insurance, annuities, disability insurance). Securities offered through Northwestern Mutual Investment Services, LLC, a subsidiary of NM and member of FINRA and SIPC. Northwestern Long Term Care Insurance Co., Milwaukee, WI (long term care insurance), a subsidiary of NM. All guarantees are backed solely by the claims-paying ability of the issuer.

31 Solutions for the New Retirement Reality Thank You