for agent use only. © 2009 american financial i'd like a way to fund my retirement that will:...
TRANSCRIPT
For Agent Use Only. © 2009 American Financial
I'd Like a Way to Fund My Retirement That Will:
• Index my value to the stock market
• Protect my money
• Allow for liquidity
• Have tax advantages
• Has growth potential
For Agent Use Only. © 2009 American Financial
Life is All About Balance
Mutual Funds
Stocks
Variable Annuity
BondsCDsCash
Fixed Annuity FIA
Possible Gain
Possible Loss
10% CapNo Possible Loss
Risk Low Risk
For Agent Use Only. © 2009 American Financial
What is a Fixed Index Annuity:
Grow retirement dollars without risking original investment
Gains tied to a market index Money is not invested in stocks Locks in gains annually
If market index decreases, value does not
Provides triple compoundingSurrender penalties may apply if product is not held for the term. Based on the claims paying ability and stability of the insurance company
For Agent Use Only. © 2009 American Financial
Why Fixed Indexed Annuities?
OLD CHOICESLower Risk Fixed Investments –
CD’s, Savings, Fixed Annuities
Rates today are in the 3-4% range
Higher Risk Investments –
Stocks, Bonds, Mutual Funds, Variable Annuities
Value of investments can go up OR down and you pay fees either way
For Agent Use Only. © 2009 American Financial
The FIA ChoiceFIA’s borrow the low risk guarantees offered from
the fixed products while borrowing some of the growth from the variable products.
Why Fixed Indexed Annuities?
Lower Risk
FIA’s
Higher Risk
CD’s, Savings, Fixed Annuities
Stocks, Bonds, Mutual Funds,
Variable Annuities
For Agent Use Only. © 2009 American Financial
Investors Total Returns
Average S&P 500Returns
16.29%
Jan ’84Thru
Dec ‘00
Jan ’84Thru
Dec ‘00
Jan ’84Thru
Oct ‘03
Jan ’84Thru
Oct ‘03
* Source - Dalbar Study as reported in“The Advantage Group
Index AnnuitiesPower & Protection by Jack Marrion”
Average Equity Fund
Investor5.32% 2.57%
12.22%
For Agent Use Only. © 2009 American Financial
Investors Fail Investment 101
Investor retention of funds is at it’s lowest level since 1988
The average equity investor remains invested in a fund for about 2 ½ years, down from a high in 1992 of about 3 ¼ years
Source - Dalbar Study
For Agent Use Only. © 2009 American Financial
Power of Annual Reset
For Agent Use Only. © 2009 American Financial
The Power of the Annual Reset
-100
-80
-60
-40
-20
0
20
40
2002 2003 2004
+15
-7
Case Study“Rule number one: Never lose money. Rule number two: Never forget rule number one.”
Warren Buffett
For Agent Use Only. © 2009 American Financial
The Power of the Annual Reset
-100
-80
-60
-40
-20
0
20
40
60
80
1 2 3 4 5
Locks in Gains
“Sell High”
Resets
“Buy Low”
?
“As long as the basic concept remained intact – no downside for me and a 50 percent share of the upside – it was an extraordinary deal.”
Donald Trump from “The Art of the Deal”
For Agent Use Only. © 2009 American Financial
Power of Annual Reset
For Agent Use Only. © 2009 American Financial
Power of Annual Reset
This example is intended to highlight the annual reset feature of a fixed index annuity. This is not a comprehensive overview of all relevant annuity features and benefits. Be sure to review all material details about these products.
We are using actual S&P 500 data from 1/1/1999 to 1/1/2009, and are assuming the hypothetical product was available for purchase on 1/1/1999 utilizing the monthly sum crediting method with a hypothetical monthly cap of 2.7%.
Keep in mind that this represents past information only and results will vary depending on actual market conditions. Past performance may not be used to predict or project future results. Actual results will vary by the specific product chosen, crediting method, caps spreads, or participation rates.
No single crediting method consistently delivers the most interest under all market conditions. The minimum guarantee (light blue line) illustrates a market scenario where no indexed interest was earned during the period shown.
Although external indexes may affect your contract values, the contract does not directly participate in any stock or other investments. You are not buying bonds, shares of stock, or shares of an index fund. The indexes do not include the dividends paid on stocks underlying a stock index or interest paid on bonds underlying a bond index. Stock dividends and bond interest are not reflected in the interest we credit to your contract. The S&P 500 index does not include dividends.
For Agent Use Only. © 2009 American Financial
GMWB “Income Benefit Riders”
The evolution of these riders – Here come the boomers
GMDBs - GMIBs - GMWBs
Comparing 1997 intro to indexed annuities 2007-2008 GMWBs
For Agent Use Only. © 2009 American Financial
Problems with these Riders
Look at these riders more like a…PENSION
Like Defined Benefit Plan& Social Security
What is more valuable to a retiree?
Pension or 401(k)?
For Agent Use Only. © 2009 American Financial
What is a Pension?
Guaranteed income Not an individual cash account
What is unique about this type of pension?
Creates lifetime income Adds an individual cash account
option
For Agent Use Only. © 2009 American Financial
Guaranteed Income with Cash Option
Base Annuity $100,000 Base Annuity w/ Rider
Premium Bonus
Assumed 10-Year Roll-up
Income Bonus (5%)
Surrender Value
Income Factor@ Age 65 (5.5%)
Guaranteed Income of $11,928 /annually OR ($994 /month)
$105,000
N/A
$171,034*
N/A
Accumulation Value
$171,034*
N/A
$105,000
7%
N/A
$10,328
N/A
$216,879
(5%)
N/A Rider Income Value $206,551
* Assumes interest crediting of 5% annually – if we assume 0% interest, then the value is $105,000
(Income Rider Values)(Annuity Values)
For Agent Use Only. © 2009 American Financial
Guaranteed Income with Cash Option
Base Annuity $100,000 Base Annuity w/ Rider
Premium Bonus
Assumed 10-Year Roll-up
Income Bonus (5%)
Surrender Value
Income Factor@ Age 65 (5.5%)
Guaranteed Income of $11,928 /annually OR ($994 /month)
$105,000
N/A
$171,034*
N/A
Accumulation Value
$171,034*
N/A
$105,000
7%
N/A
$10,328
N/A
$216,879
(5%)
N/A Rider Income Value $206,551
* Assumes interest crediting of 5% annually – if we assume 0% interest, then the value is $105,000
(Income Rider Values)(Annuity Values)
For Agent Use Only. © 2009 American Financial
Control, Flexibility, Liquidity
GMWB features include…
Start & stop Step-up feature due to market increase Walk away feature Lump-sum at death Additional free withdrawals Income for life even if cash goes to zero