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- 1. 1Retirement LifeLearn How to Retire Without RiskBy:Roccy DeFrancesco, JD, CWPP, CAPP, MMBFounder: The Wealth Preservation InstituteCo-Founder: The Asset Protection SocietyAuthor of: Retiring Without RiskCopyright 2010
- 2. 2Where is the best place to build retirement wealth?Diversification.Having said that, this presentation will focus on the proper use of Retirement Life (a cash value life insurance policy) to build a tax-favorable retirement nest egg.
- 3. 3Why Retirement Life?Why not stocks and mutual funds?The answer is simple:1) Stocks and mutual funds have NO downside protection.2) They are also tax-hostile and very expensive.In 2008 equity funds posted a one-year return of -39.54%*. *Lipper
- 4. 4Mutual Fund PerformanceThe sad truth of the matter is, that over time the vast majority approximately 80% - of mutual funds underperform the overall stock market.The Motley Fool
- 5. 5What about Stock Indexes? They too provide No Downside Protection!S&P 500 in 2008Retirement Life in 2008-37.00%0.00%S&P 500 in 1998-2008Retirement Life in 1998-20085.91%-1.40%
- 6. The Money 際際滷What did the average investor return over the last 20-years?1.87%6
- 7. Recovering from lossMost people do not understand the following numbers.Today, most people would rather not go backwards.7
- 8. 8Funding Retirement Life to build your retirement nest eggPolicy design is critical.Funding the policy over 5-7 years (or more) is ideal to minimize costs and maximize cash value and growth.Cash in a LI policy grows tax-free* and can be removed tax-free** in retirement. *(No capital gains or dividend taxes on gains)**(No income taxes when removed in retirement with a proper design)
- 9. 9$Yr. 4Mortality & ExpenseCharges$Yr. 3$Yr. 2$Yr. 1Funding Retirement LifeA Tax Free Non-Qualified Retirement PlanMaximum PremiumsCash ContributionsCompound Interest$Year 5Minimum Death Benefit
- 10. 10What is Retirement Life?Retirement Life is the best cash value life insurance policy in the marketplace to help clients build wealth for retirement in a safe, secure, and tax-free manner.
- 11. 11Retirement Life Continued-Minimum return guarantee every year while still allowing the cash value in the policy to grow at market rates every year. Growth pegged to the S&P 500 index.Principal protection (no downside due to negative market returns).From 1988-2008, the S&P 500 still averaged in excess of 8%* (even though the stock market had a crash of -46% from 2000-2002 and -59% from high to the low of 2007-2008).*(Moneychimp.com)
- 12. 12Protective Wealth Building Retirement Life locks in the gains in up years and does not participate in the down years.$115,500$110,0005%17.6%10%S&P 500Gains AreLocked In-15%$100,000$98,1755%$93,500
- 13. 13Nothing is for freeBecause of the contractual guarantees, Retirement Life policies take away some of the upside potential of the policies with caps on the growth.Caps vary per company and crediting method10 to16% annuallyIf you are reaching for returns in excess of16% a year, then you would not want to use Retirement Life to reach for those gains.
- 14. 14Retirement Life (continued)The premiums allocated to cash growth in a Retirement Life are used to purchase income producing bonds.Income from the bonds (which varies) is used to purchase options in a stock index (typically the S&P 500 index). In up years, the options pay off and provide positive returns in the Retirement Life policy.
- 15. 15ContinuedRetirement Life is a supplemental retirement plan plan for those who:do not like their stock portfolios tanking with the market.do like:Annual locking of returns; Upside growth pegged to indexes which outperform most mutual funds;No annual taxes on growth; andNo taxes when removing money from the policy in retirement.
- 16. 16Question?Would you have been happy to earn a tax free rate of return over the last 20 years of between 7.5%to9.1%?With no risk of loss due to downturns in the stock market?With a tool that self completesto protect your family in case you die prior to accumulating a retirement nest egg? Remember the average mutual fund investor earned returns of only 1.87%.
- 17. 17Wealth Building Example: Brokerage Account vs. Retirement LifeAssume you are a 45 year old male in good health and fund 15,000 after-tax into a mutual fund every year from ages 45-65.Annual expenses in an actively traded mutual fund:20% blended capital gains and dividend taxes 1.2% mutual fund expense*No money management feeLets compare that using the same funding terms using Retirement Life.The assumed gross rate of return will be 8% annually.Assume you are in the 25% income tax bracket. *(Average mutual fund expense is in approximately 1.5% annually)
- 18. 18Retirement IncomeAnnually from your mutual funds you could remove:$44,717(from ages 66-85)Annually you could withdrawal from Retirement Life:$77,739(from ages 66-85)How much more after tax retirement cash flow did the Retirement Life return? $33,022 every year for 20 years.$660,440total over the 20 year period.
- 19. 19This is the power of building wealth through Retirement Life
- 20. 20Plus Retirement Life Protects your FamilyComparing what passes to your heirs at death.
- 21. 21SummaryAgain, a diversified wealth building strategy is always the best way to approach Retirement.However, if you want to Retire Without Risk, you should allocate money to Retirement Life which has the following characteristicsNo Downside Risk due to market forcesGood upside growth potential pegged to the S&P 500 indexAnnual locking featuresTax-free growth and tax-free retirement cash flowDo not forget about the death benefit.
Editor's Notes
- #7: Because American investors are not capable of buying and holding investments for the long term. We all like to beat the indexes. You have to try to sell high and buy low to do so.However, we unfortunately are pros at Buying high and selling low!Also, have you ever heard a money manager tell a client they cant beat the indexes?Why?Because if they cant, the client would be better off in spider fund where they sit and wait for years