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Retirement Miracle notes from the book

Japan- world’s 3rd largest economy The US Economy is going through many similar events The Nikkei 225 Index Japan’s Stock Market is Still down 72%... 20 years later What Happens in a 20 year “BEAR” market? Imagine if you still had every penny of gains you’d received on your investments!

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Retirement Miracle notes from the book

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  1. Japan’s Lesson • Japan- world’s 3rd largest economy • The US Economy is going through many similar events • The Nikkei 225 Index Japan’s Stock Market is Still down 72%... 20 years later What Happens in a 20 year “BEAR” market?

  2. 38,915.44 December 29, 1989 Jan 1, 2010 9,346.13 -72.9% below its closing high Nikkei 225 Index 40 year history

  3. The reality is some never recover from a double digit loss. . . . . . .

  4. . . . . . . . ..

  5. $2,500 $2,281.34 $2,000 Indexed w/14% cap $1,500 Nikkei 14% cap $1,000 $500 $271.01 $0 Full Risk 89 90 91 92 93 94 95 96 97 98 99 0 1 2 3 4 5 6 7 8 9 Nikkei

  6. $2,500 $2,281.34 Indexed w/14% cap $2,000 $1,500 Nikkei 14% cap $1,000 $500 $271.01 Full Risk $0 89 93 97 1 5 9

  7. The Rewards of an Indexed Annuity with Annual Reset Indexed Account with Annual Reset. + + + Dow + + + + Indexed Annuity The stock market, specifically the “Dow”, had a net gain of zero from 1966 to 1982. Equity Indexing would have provided growth by participating in the gain of the up markets, but not participating in the loss of the down markets. + + 750 “Dow” 750 1966 1974 1982

  8. The difference that simply eliminating the negative years makes Is Substantial Indexed Accounts do exactly that Capture each years of positive gains, and eliminate each negative years. Major Index Leader

  9. Indexed Fixed S&P 500

  10. Imagine if you still had every penny of gains you’d received on your investments! To give you an idea of just how much of a difference having your gains locked in can make, here’s a fascinating little quiz… For Agent Training

  11. Stocks and Mutual Funds Let’s answer some common questions: 1. How does a Life Savings Account (LSA) perform compared to stocks or mutual funds? 2. Is it really true that if you simply hold on long enough, investing in stocks and mutual funds will out-perform just about anything else? For Agent Training

  12. Quiz Before we answer that let’s have a lesson in Annual Rates of Return A 25% Average Annual Return Not bad, huh? For Agent Training

  13. Do you think it’s possible to, get a 25% average annual return for four years… and end up where you started? • Is it possible to invest $100,000, get a 25% average annual return on your money for four years… and end up with only the $100,000 you started with? • If you answered “no,” you’re in for a real surprise! • But let’s see how much money you actually have in your account… For Agent Training

  14. Averages Can Be Deceiving Start with $100,000 $200,000 $100,000 $200,000 end $100,000 (200% gain less 100% loss divided by 4 years equals) 25% Average Annual return • Year 1 • Year 2 • Year 3 • Year 4 100% gain 50% loss 100% gain 50% loss For Agent Training

  15. Market Myths How much did you REALLY earn? Actual Return= Zero Average Return= 25%

  16. So what good did getting a 25% average annual return do you? • That and a quarter won’t even buy you a cup of coffee, let alone a mocha latte! • You have nothing to show for this roller- coaster ride other than heartburn and a stomach ache. For Agent Training

  17. Wall Street illusionists • The Wall Street illusionists have been pulling the wool over your eyes for decades! • You take all the risk, and they get the rewards, whether you make money or not! For Agent Training

  18. “What's worse, the typical 401(k) will steal an average of nearly $155,000 from each worker over a lifetime of saving.” Hidden 401(k) Fees: The Great Retirement Plan Rip-Off By Adam J. Wiederman, The Motley Fool

  19. Shocking Fact #1: • A recent study1revealed that, for the past 190 years, American stocks have averaged a REAL annual return of only 1.4 percent! • The study did not deduct, commissions or taxes. 1“Stock market’s real return? Paltry,” by Anthony Mirhaydari, MSN Money, February 1, 2010 For Agent Training

  20. Shocking Fact #2: • The typical equity mutual fund investor has actually been losing one percent a year for the past 20 years, after adjusting for inflation.3 3DALBAR’s 2008 Quantitative Analysis of Investor Behavior For Agent Training

  21. Warren Buffet: “I have two rules when investing. • Rule #1) Never lose money. • Rule #2) When in doubt see rule number 1” • “… I advocate indexed investments … for serious cash.” • http://www.berkshirehathaway.com/letters/1988.html For Agent Training

  22. Beating The S&P 500 • “Over the 15 years ending October 31,2005, 94.28% of actively managed funds did worse than the S&P 500” John Stossel, author and reporter ABC’s 20/20. Myths Lies and Downright Stupidity by John Stossel For Agent Training

  23. Beating The Market • “While 95% of funds failed to beat the S&P 500 the tiny 5% of funds that did beat the market do not do it consistently. In other words, picking a fund that beat the market last year does not mean it will beat the market in the coming years. • “…beating the market average (S&P 500) has proven to be impossible to accomplish over time”- “Stop Sitting on Your Assets” by Marian Snow For Agent Training

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  25. S&P 500 Note: $156,957 previous slide includes all charges For Agent Training

  26. Amazing • Start with $100,000 in Mutual Funds Minus the ups and downs of the market • End with $100,770 before fees and tax • Deduct Mutual Fund Fees of $32,361 • Net before tax $68,409 – $20,522 (30% tax) • After 11 years of fees and net tax $47,866 • Wait it can get worse… For Agent Training

  27. 401K Fees Additional fees typically 2%-5% If in the previous example the money was in 401K Deduct MORE And if money is taken and under age 59 1/2 take a 10% penalty tax (which about 70% do) For Agent Training

  28. 401K Fees Most workers don't know about 401K fees, rebates and revenue-sharing agreements Most fees are buried in the fine print or not disclosed at all The U.S. Department of Labor lists 17 distinct 401(k) fees, including ones for record keeping, legal services and toll-free telephone numbers. Most common fees: Management fees, Administrative fee, Distribution fees (about 1% a year), Sales loads (averaging 1.4%) Trading costs (averaging .5- 1% ) Excess capital gains taxes For Agent Training

  29. “What the heck is the rate of return on a typical policy?” You would have to get a 8 – 12% average annual return in a taxable account to equal the average net return in a typical and properly designed LSA assuming you’re in the 15%- 35% tax bracket. For Agent Training

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  34. How does it work? For Agent Training

  35. Life Savings Account- LSA Other points: • Never Go Backwards • Gains Locked In • Minimum Guaranteed Return of 10.4% over 5 years or 2% per year Keep in mind that you receive a guaranteed and predictable cash value increase every single year – in both good times and bad. For Agent Training

  36. No two LSA plans are alike • However, no two LSA plans are alike – each one is custom tailored to the client’s unique situation. • To find out how much your financial picture could improve if you added a Life Savings Account to your financial plan, • request a free, no-obligation analysis. For Agent Training

  37. Let me let you in on a little secret… One of the many advantages of a properly structured LSA-type policy is that you can borrow the equity (money) in your policy, use it to invest elsewhere, and your money in the policy continues growing as though you hadn’t touched a dime of it! (Note – not all companies offer this feature.) For Agent Training

  38. Little Secret • Result: • You could be receiving the 8 – 11% after-tax equivalent return… • PLUS the return of the investment you put the money into! • This allows you to have your money working for you in two ways at the same time! For Agent Training

  39. Bottom Line • The rate of return on an IUL will put just about any traditional investment to shame, and it will do that without the risk or volatility of stocks, real estate, gold, commodities and other investments. • And without the risk of taxes For Agent Training

  40. Tax plus 10% • In most cases a $100k withdrawal would span 2 or 3 tax rates but most of it would probaby fall in the 28% bracket. Using that for argument's sake as it's close, the total tax will be $38,000 on the early distribution -- 28% tax rate + 10% penalty tax. • If an individual fails to take out the Required Minimum Distribution (RMD) from a retirement plan, there is a 50 percent penalty on the shortfall. For Agent Training

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