Generate More Efficient Income and a Stronger Portfolio

Transcription

1 Generate More Efficient Income and a Stronger Portfolio All examples shown are hypothetical and for illustrative purposes only and do not represent the performance of an actual investment. Past performance is no guarantee of future results. An investor can not invest directly in an index. Please see page 5 for important disclosures, assumptions and additional information. The New York Life Lifetime Income Annuity is issued by New York Life Insurance and Annuity Corporation (A Delaware Corporation), a wholly owned subsidiary of New York Life Insurance Company, 51 Madison Avenue, New York, NY Guarantees are based on the claims-paying ability of the issuer. For most jurisdictions, the policy form number for the Lifetime Income Annuity with Cash Refund is: State variations may apply. ANNUITIES Are Not FDIC/NCUA Insured Are Not a Deposit May Lose Value Have No Bank Guarantee Are Not Insured by Any Government Agency LIA-1021 (12/10) (11/10)

2 Retirees Need a Plan for Living Longer Probability of a healthy 65-year-old living to various ages Source: Annuity 2000 mortality table Half of all 65-year-old healthy couples have at least one spouse living to age 92 or older. Retirement Risk 1 Many are at risk of outliving their assets Value of Assets if Customer Had Retired in a Good Year % equity, 50% bonds Value of Assets if Customer Had Retired in a Bad Year % equity, 50% bonds Asset Value Asset Value Year Year Source: New York Life, 2008 Retiring into a bear market would potentially result in failure during a retiree s lifetime. Retiring into a bull market may still result in failure with any withdrawal rate higher than 4%. 2

3 Generate Higher Income Streams 2 A Lifetime Income Annuity offers significantly higher cash flows than other incomegenerating asset classes, such as bonds, if the objective is to generate more income now, rather than maintaining principal Lifetime Income Annuity Payout (includes interest and return of premium) AAA Municipal Bond Yield A+ Municipal Bond Yield Age Years Years Greater Income 3 Leverage mortality credit Components of a Lifetime Income Payout...but only an insurance company can manufacture mortality credit. Payouts Investment advisors can manufacture this payout... Age Interest Return of Premium Mortality Credit Source: New York Life actuarial data and methodology Lifetime Income Annuities can deliver higher payouts because, in addition to distributing interest and premium, they subsidize those who live longer with the capital of those who die early. 3

4 Use Less Assets for Income and Invest the Rest 4 Assets needed to generate about $34,600 in annual income after-tax and net of fees AUM Growth LIA + Equity Portfolio vs. Bond Portfolio Value (000s) Equity Market Value* Bond Portfolio Value** Muni Bond Portfolio comprised of 30-year AAA bonds New York Life Lifetime Income Annuity (includes interest & return of premium) LIA Cash Refund Value Year Optimize the Portfolio 5 Incorporating a Lifetime Income Annuity into portfolios takes the pressure off withdrawals Model Portfolio Probability of assets > $0 after 30 yrs Median ending asset value (000s) Assumptions: Male age 65, qualified account, 4% withdrawal rate, adjusted annually for 2.5% inflation. Which can lead to: Greater certainty that retirees won t outlast their assets. Higher ending balances for greater legacy potential. 4

5 Definitions: The S&P 500 is an unmanaged index and is widely regarded as the standard for measuring Large Cap US stock market performance The Barclays Capital US Aggregate Bond Index is a broad-based bond index comprised of government, corporate, mortgage and asset-backed issues rated investment grade or higher. The Morningstar Intermediate US Government Bond Index includes US Treasury and US Government Agency bonds with maturities between four and seven years. Under the terms of the contract, a payout option, once selected, is irrevocable after the free-look period has ended. The Lifetime Income Annuity cannot be surrendered. 1. Retirement Risk Hypothetical value of assets held in an untaxed account of $1,000,000 invested in a portfolio of 50% stocks and 50% bonds. The illustration uses historical annual performance from obtained from Ibbotson Associates. Past performance is no guarantee of future results. Stocks are represented by S&P 500 and bonds by Morningstar U.S. Intermediate Government Bond Index. Each withdrawal rate is adjusted annually for inflation using historical rates. The portfolio is rebalanced annually and assumes an annual deduction of 125 and 75 basis points for management fees for stocks and bonds respectively. This example does not take into account taxes, if any. This example is for illustrative purposes only and does not represent the performance of an actual investment. Note: an investor cannot invest directly in an index. 2. Generate Higher Income Streams The Lifetime Income Annuity payout is based on a New York Life Lifetime Income Annuity with Cash Refund on a $1,000,000 premium. Annual income amounts are based on rates in effect as of 4/1/2010. Rates are subject to change. Municipal Bond yields based on the General Obligation Muni-Bond Index, Bloomberg fair market value curve AAA-rated and A+ rated, 30-year maturity as of 4/1/ Greater Income Based on a 65-year-old male with a $1,000,000 premium. Graphical representation based on an example introduced by Dr. David Blake. 4. Use Less Assets for Income and Invest the Rest Assumptions: 65-year-old male, 4.46% hypothetical yield on municipal bond portfolio, 1% annual advisory fee for the municipal bond portfolio, 6.8% Lifetime Income Annuity payout rate, 28% federal tax rate, 64% exclusion ratio for Lifetime Income Annuity (un-taxable portion of Lifetime Income Annuity payout) non-qualified account. This example is for illustrative purposes only. The municipal bond portfolio assumes a hypothetical yield of 4.46% (based on the US Muni General Obligation AAA Curve, Bloomberg fair market value curve AAA-rated 30 -year maturity as of 4/1/2010) and is not on behalf of any particular investment or portfolio. Past performance is no guarantee of future results. An investor cannot invest directly in an index. Municipal Bonds are issued by state governments and/or local municipalities. These bonds pay interest that is generally exempt from Federal, and sometimes state and local income taxes (depends on individual situation; please consult a tax advisor). Lifetime Income Annuities are insurance products whose payouts include return of principal, interest and mortality credits. Lifetime Income Annuity model uses a New York Life Lifetime Income Annuity with Cash Refund policy issued for a 65-year-old male on a $562,000 premium. Annual income amounts are based on rates in effect as of 4/1/2010 and are subject to change. * For illustrative purposes only and not on behalf of any particular investment portfolio. Assumption is based on an average 20-year S&P 500 return of 8.1% (1/1/ /31/2009 ) 7.1% net of 1% annual advisory fee but not taking into consideration any applicable taxes on the gain or any withdrawals. This example assumes reinvestment of any gains, interest & dividends. Past performance is not a guarantee of future results. Equity investments are subject to market fluctuations. Fixed income investments are subject to interest rate and credit risk. ** If held to maturity. 5. Optimize the Portfolio Source: New York Life Insurance Company, Hypothetical value of assets held in an untaxed account of $1,000,000. The illustration is based on a Monte Carlo model of 1000 scenarios. Equity and bond returns were generated using an economic scenario generator, with correlations estimates using historical monthly S&P 500 Index returns from and Barclay Capital U.S. Aggregate Index returns from Each withdrawal rate is adjusted annually for 2.5% inflation. The portfolios are rebalanced annually and assume an annual deduction of 150 basis points for management fees on non-annuity assets. Rates based on New York Life Lifetime Income Annuity with Cash Refund and 3% Annual Increase option for a 65-year-old male on a $300,000 premium. Annual income amounts are based on rates in effect as of 4/1/2010 subject to change. This example is for illustrative purposes only and does not represent the performance of an actual investment. Past performance is no guarantee of future results. Note: an investor cannot invest directly in an index. 5

6 New York Life Insurance Company New York Life Insurance and Annuity Corporation (a Delaware Corporation) 51 Madison Avenue, New York, NY The Company You Keep