The Truth About Retirement Plans
The Truth About Retirement Plans - Presentation Transcript
1. The Truth about Retirement Plans
2. Problems Facing Today’s Consumers Rising Cost of Living If you and your spouse earn $100,000 a year and want to retire in 18 years, with average inflation of 4%, you will need a little more than $200,000 a year to equal your current income of $100,000. Debt Trap U.S. consumer debt has doubled over the past ten years, with the average debt at $18,700 per U.S. household [excluding mortgages]; bankruptcy filings are estimated to have topped 1.8 million in 2005.
2. Problems Facing Today’s Consumers Rising Cost of Living If you and your spouse earn $100,000 a year and want to retire in 18 years, with average inflation of 4%, you will need a little more than $200,000 a year to equal your current income of $100,000. Debt Trap U.S. consumer debt has doubled over the past ten years, with the average debt at $18,700 per U.S. household [excluding mortgages]; bankruptcy filings are estimated to have topped 1.8 million in 2005.
(1) Poor Savings Habits Today, savings rates are at their lowest levels since the Great Depression. For the first time since 1933, savings rates fell into negative territory at -0.5% in 2005. Americans either dipped into savings or increased their borrowing.
(2) Lack of Security Timothy Egan, “Debtors in Rush to 1 Bankruptcy as Change Nears”, The If you died tomorrow, your family could face financial devastation. The average death claim New York Times Online, August 21, 2005. paid by the insurance industry in 1999 was $15,130.3 Martin Crustinger, “Savings Rates at 2 Retirement Woes Lowest Levels Since 1933”, Associated Press, January 30, 2006. Most Americans retire in poverty. According to the U.S. Census Bureau, 73.8% of Statistical Compilation of Annual 3 Statement Information for Life/Health Americans 65 and older retire on a combined income of private pension and Social Insurance Companies in 1999* NAIC, Security of $10,000 or less a year.4 2000 Social Security Administration, 1996. 4 2 Use for recruiting purposes only.
(2) Lack of Security Timothy Egan, “Debtors in Rush to 1 Bankruptcy as Change Nears”, The If you died tomorrow, your family could face financial devastation. The average death claim New York Times Online, August 21, 2005. paid by the insurance industry in 1999 was $15,130.3 Martin Crustinger, “Savings Rates at 2 Retirement Woes Lowest Levels Since 1933”, Associated Press, January 30, 2006. Most Americans retire in poverty. According to the U.S. Census Bureau, 73.8% of Statistical Compilation of Annual 3 Statement Information for Life/Health Americans 65 and older retire on a combined income of private pension and Social Insurance Companies in 1999* NAIC, Security of $10,000 or less a year.4 2000 Social Security Administration, 1996. 4 2 Use for recruiting purposes only.
3. What Would Be the Perfect Account? • Triple Compounding Interest • Excellent Returns • Safety of Principle • Tax Free Income • Access/Liquidity
4. Types of Interest 6% Simple 6% Compound 6% Triple Compound Interest Interest Interest $1 $1 1492 $1 $21,247 $157 1663 $11 $451,446,116 $24,566 1834 $22 The hypothetical examples are for illustrative purposes only and do not represent any particular savings vehicle. The actual interest rate may fluctuate over time, and as a result, the $9,591,993,611,211 $3,850,315 2005 $32 actual time it will take an investment to double in value cannot be predicted with any certainty. FFS nor any of its associates offer tax advice. Please consult with your tax professional. 4 Use for recruiting purposes only.
5. Excellent Returns and Safety Used with permission from American Equity Investments Life Insurance Company, Inc. This is not a solicitation or offer to purchase any product. FFS is not a franchise. FFS does not charge any 5 fees for the right to engage in the business of offering, selling or distributing goods or services. Use for recruiting purposes only.
6. Tax Free Income & Access Tax Tax Tax Deductible Deferred Free Contribution Accumulation Distribution You can only get two of the three! Which would you choose? Let’s take a look at two brothers who FFS nor any of its associates offer tax 6 advice. Please consult with your tax chose differently. professional. Use for recruiting purposes only.
7. Tax Free Income Our story begins with two brothers, each married with two children. Both earn $70,000 a year, have $40,000 in savings and $600 monthly earmarked for retirement. Brother “A” Brother “B” Believes in “The Old Way” — Believes in “The New Way” — Save for retirement in qualified accounts, Save for retirement in non-qualified accounts receive tax deduction and pay taxes later. and receive tax free income later. • $15,000 emergency fund. • $15,000 emergency fund. • $6,520 contributions to 401(k) plus • $2,100 contributions to 401(k) plus employer match $1,050. employer match $1,050. • $5,100 annual premium $600,000 • $680 annual premium $600,000 Equity Indexed Universal Life. 30 year term. Brother “A” Brother “B” is a • PLUS $5,000 contribution to EIUL for five hypothetical example and is for illustrative purposes only. This is not a • $25,000 in an IRA. years, totaling $25,000. solicitation or offer to purchase any product. FFS nor any of its associates offer tax advice. Please consult with your tax professional. Example assumes tax rate of 25% on Who made the right decision? withdrawals, 33% tax rate for tax 7 savings, 8% annual compounded rate of return using FFS Calculators, Retirement Needs. Use for recruiting purposes only.
8. Tax-Free Income/Access Results After 30 Years Brother “A” Brother “B” Believes in “The Old Way” — Believes in “The New Way” — Save for retirement in qualified accounts, Save for retirement in non-qualified accounts receive tax deduction and pay taxes later. and receive tax free income later. • $22,300 emergency fund. $22,300 emergency fund. • $858,000 401(k). $357,000 401(k). • • $252,000 IRA. $701,000 cash value EIUL. • • ZERO term insurance. $855,000 universal life insurance • • ($12,000 annual premium to replace) death benefit. $65,000 cumulative tax savings. $21,000 cumulative tax savings. • • Brother “A” Brother “B” is a hypothetical example and is for $1,109,000 total retirement savings. $1,058,000 total retirement savings. illustrative purposes only. This is not a • • solicitation or offer to purchase any product. FFS nor any of its associates offer tax advice. Please consult with It’s not how much you make your tax professional. Example assumes tax rate of 25% on withdrawals, 33% tax rate for tax savings, 8% annual compounded rate 8 It’s how much you keep! of return using FFS Calculators, Retirement Needs. Use for recruiting purposes only.
9. Tax-Free Income/Access Results During Retirement Brother “A” Brother “B” Believes in “The Old Way” — Believes in “The New Way” — Save for retirement in qualified accounts, Save for retirement in non-qualified accounts receive tax deduction and pay taxes later. and receive tax free income later. • $84,000 annual income till age 120. $125,000 annual income till age 120. • • $84,000 taxable withdrawals from qualified $25,000 taxable withdrawals from qualified • accounts. accounts. $21,000 tax. $6,250 tax. • • $0 $100,000 TAX FREE loans via EIUL. tax free. • • $63,000 net after tax income. $118,750 net after tax income. • • Brother “A” Brother “B” is a $1,155,000 taxes during retirement. $343,750 taxes during retirement. hypothetical example and is for • • illustrative purposes only. This is not a solicitation or offer to purchase any product. FFS nor any of its associates It’s not how much you make offer tax advice. Please consult with your tax professional. Example assumes tax rate of 25% on withdrawals, 33% tax rate for tax It’s how much you keep! savings, 8% annual compounded rate 9 of return using FFS Calculators, Retirement Needs. Use for recruiting purposes only.
10. Tax-Free Income/Access Results During Retirement Brother “A” Brother “B” Believes in “The Old Way” — Believes in “The New Way” — Save for retirement in qualified accounts, Save for retirement in non-qualified accounts receive tax deduction and pay taxes later. and receive tax free income later. $118,750 net after tax income. $118,750 net after tax income. • • $158,000 taxable withdrawals from qualified taxable withdrawals from qualified • •$25,000 accounts. accounts. $39,250 tax. $6,250 tax. • • $0 tax free. $100,000 TAX FREE loans via EIUL. • • At age 100 Brother “B” has 20 In 9 years, at age 74, more years of income and if he Brother “A” Brother “B” is a dies, his family would receive Brother “A” runs out of money! hypothetical example and is for illustrative purposes only. This is not a $3,795,000 income tax free! solicitation or offer to purchase any product. FFS nor any of its associates offer tax advice. Please consult with Which plan makes you feel more your tax professional. Example assumes tax rate of 25% on financially secure? withdrawals, 33% tax rate for tax savings, 8% annual compounded rate 10 of return using FFS Calculators, Retirement Needs. Use for recruiting purposes only.
11. The Access of Money Brother “A” Brother “B” Must WITHDRAWAL to create income Takes LOANS $1,109,000 Total EIUL savings $701,000 Total retirement savings ($158,000) Minus first year Income $0 Minus first year income Remaining balance $951,000 Remaining balance $701,000 $76,000 Plus annual interest $56,000 Plus annual interest $1,017,000 Account value $757,000 Account value ($158,000) Minus second year income Minus second year income $0 Remaining balance $859,000 Remaining balance $757,000 $69,000 Plus annual interest Plus annual interest $61,000 $928,000 Account value Account value $818,000 ($158,000) Minus third year income Minus third year income $0 Remaining balance $770,000 Remaining balance $818,000 $62,000 Plus annual interest Plus annual interest $65,000 $832,000 $883,000 Account value Account value Brother “B” NEVER interrupts his compounding.
12. Summary • Triple Compounding Rule of 72 • Excellent Returns • Safety of Principle • Tax Free Income • Access/Liquidity
국내에서 은퇴관련 재정 상담이 본격적으로 이루어지게 된 것은 그리 오래되지 않고, 실행도 그리 본격화되지 않고 있다. 하지만, 보다 현실적인 은퇴 재정설계 프로그램이 정착되기 위해서 많은 연구와 노력이 필요해 보인다.
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