The retirement revolution

What boomers need to know when planning their retirement years

Second careers

Volunteering

Travelling the world

Fulfilling dreams and ambitions

Today’s retirees

Redefine retirement

Spend 1/3 of life in retirement

Financial needs of an entire generation

Biggest financial concerns

1. Outliving retirement savings

2. Inflation

3. Market volatility

1Source: Poll of 902 Canadians between the ages of 50 and 70 years by Maritz Research conducted between July 6 and 12, 2006. The results have a margin of error of +/- 3.3 per cent, 19 times out of 20.

Concern #1: Outliving retirement savings

Life expectancy

Couple aged 65 has:

94% chance of 1 partner living to age 80

63% chance of 1 partner living to age 90

Probability of having to fund retirement for 25 years longer

Source: Annuity 2000 Mortality Table, Society of Actuaries

Probability of a healthy 65-year-old living until…

AgeSingle female

Single male

One member of a couple

70 96% 93% 99%

80 81% 71% 94%

90 44% 33% 63%

95 23% 16% 36%

Source: Annuity 2000 Mortality Table, Society of Actuaries

Concern #2: Inflation

Effect on retirement savings

Erodes the buying power of your savings

Example

Based on a $0.08 stamp and $0.46 coffee in 1977 and a $0.52 stamp and $1.60 coffee in 2007.

Effects of inflation on $1,000

Number of years

Rate of inflation

0% 1% 2% 3% 4%

1 $1,000 $990 $980 $970 $962

10 $1,000 $905 $820 $739 $676

20 $1,000 $820 $673 $545 $456

30 $1,000 $742 $552 $402 $308

Inflation driven prices

Retirees more exposed

Between 1992 & 2004, Canadians aged 65 years & older:

Prices rose 26.1%

Compared to

24.4% for non-seniors

Source: Statistics Canada, 2001 Survey of Household Spending.

Differences in spending patterns

Medical

Travel

Reading materials

Utilities

Rent and tenant’s expenses

Cost of health care

Federal budget restraints

Increasing health care needs

Pay more for medical costs on own

Fact

Canadian households are currently saving at levels that will not generatesufficient income to cover their nondiscretionary expenses in retirement.

– Canadian Institute of Actuaries,May, 2005

Strategies that can help

1. Retire to something Working during retirement

2. Asset allocation Stocks, bonds & cash

3. Growth component to investment Invest holdings in equities

Concern #3: Market volatility

Unpredictable market conditions

Concern for those entering the retirement phase

Once lost, difficult to replace

Can’t work due to health

Retirement risk zone

5 – 10 years before and after retirement

Affect ability to fund retirement

Impact ability to generate consistent and dependable income

Moshe A. Milevsky and Thomas S. Salisbury, Asset Allocation and the Transition to Income: The Importance of Product Allocation in the Retirement Risk Zone. September 27, 2006.

Sequence of returns

Greater risk from stock market declines near retirement

Saving phase

+7%

-13%

+27%

Earn average of 7%

Poor returns with the Retirement risk zone

Poor market returns early in retirement reduce ability to withdraw income

Portfolio may not have time to recover

Making withdrawals from savings

Scenarios for sequence of returns

65 year old investor

$100,000 in retirement savings

Need to withdraw 9% of savings annually

Scenario 1 (7, 7, 7…)

Money could last 21 years or until age 86

7% annual return on investment every year

For illustration purposes only.

Scenario 2 (27, 7, -13…)

Average rate of return is 7%

Money could last 9 years or until age 95

Earn 27% in 1st year

Gain 7% in 2nd year

Lose 13% in 3rd year

For illustration purposes only.

Scenario 3 (-13, 7, 27…)

Average rate of return is 7%

Money would be gone by age 81

Lose 13% in 1st year

Gain 7% in 2nd year

Gain 27% in 3rd year

For illustration purposes only.

Portfolio lifespan

Chart assumptions: 65-year-old investor with $100,000 in retirement savings, withdrawing nine per cent each year. For illustrative purposes only.

65 94

Age

$140,000

$120,000

$100,000

$80,000

$60,000

$40,000

$20,000

$0

Reti

rem

en

t S

avin

gs

Scenario 1 Scenario 2 Scenario 3

How long your money will last?

Role of luck

No guarantee

Need creative financial solutions

GMWBs – A great option

Help manage the risks related to the retirement risk zone

Funds that include a GMWB provide similar growth potential as mutual funds

Additional features and benefits to provide predictable, sustainable income

Amount of income you receive can be guaranteed for life

Protection features of GMWBs

Potential creditor protection Potential to protect your assets

Estate benefits Can direct to your designated beneficiaries

without the time delay and expense of probate

GMWB features & benefits

*Exceeding the withdrawal thresholds may have a negative impact on future payments. Other conditions may apply.

Feature BenefitIncome for a guaranteed period of time, or for life

Regardless of how the markets perform, you can be guaranteed income for at least 20 years or longer, and there is a new option to guarantee income for life.*

Principal guaranteeYou’re guaranteed that, at a minimum, all of your principal investment will be returned to you, no matter how the underlying investments perform.*

Potentially increasing income

With bonuses and opportunities to lock in market gains, the amount of your income payments and the number of payments has the potential to increase significantly over time.

Consistent income that won’t decrease

You’re guaranteed a stream of income that will not decrease, through regular withdrawals of up to 5% for at least 20 years, with an option to guarantee them for life.*

FlexibilityYou can switch between funds and fund managers as you wish, and you can access your savings at any time should the need arise.

Tax-efficient income

When held in a non-registered account, these investment products offer the potential for tax efficient income.

Speak to your advisor

Important notes

The commentary in this presentation is for general information only and should not be considered investment or tax service to any party. Individuals should seek the advice of professionals to ensure that any action taken with respect to this information is appropriate to their specific situation.

Manulife Investments is the brand name identifying the personal wealth management lines of business offered by Manulife Financial and its subsidiaries in Canada. As one of Canada’s largest integrated financial services providers, Manulife Investments offers a variety of products and services including: segregated funds, mutual funds, principal protected notes, annuities and guaranteed interest contracts.

Manulife and the block design are registered service marks and trademarks of The Manufacturers Life Insurance Company and are used by it and its affiliates including Manulife Financial Corporation.