Finding retirement security

Transcription

1 Finding retirement security Protect your savings. Discover the growth and income potential of fixed indexed annuities. LINCOLN ANNUITIES Not a deposit Not FDIC-insured May go down in value Not insured by any federal government agency Not guaranteed by any bank or savings association Client Guide Insurance products issued by: The Lincoln National Life Insurance Company

2 Plan for the road ahead You ve spent years saving for retirement, and you ve got a lot to look forward to. Maybe you want to travel, spend more time with your grandkids, volunteer, or just do more of the things you like. Whatever you decide, you want to feel confident that you ll be financially secure. As you plan for the future, think about the challenges that could keep you from reaching your goals. Prepare for the challenges that could stand in your way The risk of outliving your savings People are living longer than the generations who retired before them. Years ago, Americans received pensions and spent less than 10 or 15 years in retirement. Today, your retirement could last 25 years or more. This is why you need to take steps to make sure you ll have income that lasts a lifetime. 1 in 4 Americans age 65 will live past age 90.* Inflation Low interest rates Tax risk A $60,000 lifestyle today would require nearly double the income $108,366 annually to maintain in 20 years. 1 Since 2006, interest rates have been historically low. Unfortunately, many risk-averse investors who prefer the safety of traditional deposit accounts or bonds have been frustrated by years of diminishing returns. And who knows when rates will rise? You pay taxes on your earnings from savings accounts, bonds, CDs and mutual funds. This tax exposure can hinder the growth of your savings over the years. *Social Security Administration, Life Expectancy Calculator. 1 Inflation Calculator- Save Enough to Account for Inflation, buysupside, inflationjan08.htm; *assumes 3% annual inflation rate. 2

3 Where safety and growth opportunities meet How can you protect your savings and accumulate more for your future? While investing in the market may offer greater growth opportunities, it can also increase your exposure to losses. On the other hand, traditional deposit accounts have limited growth potential. The average yield has been less than 1% over the past three years. 1 These low returns may not provide the growth you need for your retirement. A smart alternative in today s low interest rate environment Imagine an option that can give you the safety of principal protection with higher return potential in a low interest rate environment. That s what a fixed indexed annuity can do. It s an insurance contract that can help you feel more secure about your retirement income. You can fund your contract with a lump sum premium or in installments, and the annuity offers principal protection, growth opportunities and income. What you like about traditional deposit accounts and more Traditional deposit accounts offer: ➊ Principal protection ➋ Protection from losses ➌ Growth opportunities ➍ Predictable rate of return Fixed indexed annuities offer: ➊ Principal protection ➋ Protection from losses ➌ Tax-deferred growth opportunities ➍ A guaranteed rate of return and the opportunity to earn interest linked to market performance ➏ Income options including a guaranteed income stream for life ➐ A legacy for your heirs 3.8 % 4.8 % is the average expected return of a fixed indexed annuity issued today.* * Investment News, Fixed-Indexed Annuities Soar in Popularity," fixed-indexed-annuities-soar-in-popularity, November 29, Source: FDIC, 3

4 The power of tax-free growth The money you put in your fixed indexed annuity grows tax-deferred. So, the interest you earn won t be taxed, and the dollars you would have lost to taxes earn interest. These earnings continue to compound. As a result, tax-deferred growth gives you the power to accumulate more over a shorter period of time. And since you don t pay taxes until you take withdrawals, the funds you keep in your annuity can continue to work for you. This graphic illustrates how tax deferral can make a significant difference in the long term. $100,000 in an annuity grows faster than the same amount invested in a taxable investment. After 21 years, the annuity account value is $56,444 more than money held in the taxable account. Tax deferral can boost your savings $250,000 Account value $200,000 $150,000 Tax-deferred Tax-deferred after taxes* Taxable $227,877 $183,120 $171,433 $100, Years Assumptions: Premium: $100,000 Annual gross rate of return: 4% Tax bracket: 35% * Withdrawals of earnings are taxable as ordinary income and, if taken prior to age 59½, may be subject to an additional 10% federal tax. This example is hypothetical and for illustrative purposes only. The hypothetical rates of return shown in this example are not guaranteed and should not be viewed as indicative of the past or future performance of any particular investment. This example is based on a hypothetical situation assuming taxable and tax-deferred growth of $100,000, a 6% annual rate of return and a 35% tax rate over a 20-year period. Changes in tax rates and tax treatment of investment earnings may impact the hypothetical example. Lower maximum tax rates on capital gains and dividends would make the investment return for the taxable investment more favorable, thereby reducing the difference in performance between the accounts shown. Investors should consider their individual investment time horizon and income tax brackets, both current and anticipated, when making an investment decision, as these may further impact the results of the comparison. 4

5 A clear advantage over taxable investing If you have taxable investments, you may not realize how much your annual returns are reduced by taxes. The impact is even more significant the higher your tax bracket. As this table shows, an individual in the 35% tax bracket will only earn 3.25% net after taxes for a taxable investment with a 5% annual rate of return. How taxes reduce annual returns of taxable investments Annual rate of return of a taxable investment Annual rate of return after taxes 15% tax bracket 25% tax bracket 35% tax bracket 5 % 4.25 % 3.75 % 3.25 % A fixed indexed annuity has tax efficiencies to benefit your retirement strategy ➊ The more money you have growing tax-deferred, the greater your income potential becomes. ➋ If you move to a lower tax bracket when you begin taking annuity withdrawals, your tax-deferred growth would provide even more income for you. ➌ The guaranteed rate of return is your real rate of return. This means if the annual return is guaranteed at 5%, you would earn 5% regardless of your tax bracket. 5

6 Increase your growth potential When you purchase your fixed indexed annuity, you have a choice of interest accounts that provide a variety of growth opportunities. There is a Fixed Account, which pays a guaranteed minimum interest rate, and indexed accounts, which are linked to the performance of an external index, for example, a U.S. stock market index. The interest earned in these accounts is calculated over a period of time, such as each year on your contract anniversary. You cannot invest directly in an index. You can put your money in one or any combination of accounts. If you want to make a change, you can reallocate on your contract anniversary. Choose the potential of indexed interest If you decide to put money in an indexed account, the interest you earn is based on a crediting strategy that tracks changes in the index over a period of time. Your earnings are influenced by either: A crediting strategy with a cap an interest rate ceiling Your money can grow up to a maximum set rate of interest 12 A crediting strategy with a spread a percentage subtracted from the total index return 12 A spread is applied to your growth % % 3% Spread 6 6 7% 4 4% Cap 4% Index Performance Your Earnings Index Performance Your Earnings Example: A 4% cap Example: A 3% spread If index returns 10% over the year, your account is credited 4%. If the index is flat or negative, you earn 0%. If index returns 10% over the year, your account is credited 7%. Calculation: 10% 3% =7% If the index is flat or negative, you earn 0%. 6

7 The Power of Zero Even in a down market, you never earn less than 0%. Year 1: $100,000 in a fixed indexed annuity Year 2: Market is down 10% Year 2: Account value: $100,000 You never need to recover from losses. Year 1: $100,000 in a mutual fund account Year 2: Market is down 10% Year 2: Account value: $90,000 You need more than 11% growth to get back to $100,000. A performance triggered crediting strategy a specified rate that s earned if the index is positive or flat You can earn a specified rate of return 12 A crediting strategy with a participation rate a percentage of the index gain credited to your account You can earn a percentage of index gains % 10 10% % 4 3.5% 4 3.5% Index Performance Your Earnings 0 Index Performance Your Earnings Example: A 3.5% trigger rate Example: A 75% participation rate If index performance is positive or flat over the year, your account is credited 3.5%. If the index is negative, you earn 0%. If index returns 10% over the year, your account is credited 7.5%. Calculation: 75% x 10% = 7.5% If the index is flat or negative, you earn 0%. Because you re never investing directly in the market, you can never lose money due to volatility or market downturns. Instead, you have the potential to experience some of the upside index performance with none of the downside risk. 7

8 Turn on the income you need When you want access to cash, you have the following choices. 1 Increase your income potential before you start taking income If you want the opportunity to maximize your income, you can add an optional living benefit rider to your fixed indexed annuity at issue for an additional cost. It gives you these income enhancements: During the accumulation phase, your income base will grow by a set percentage until you re ready to start taking income distributions. If your account value steps up to exceed your income base amount, your income base will rise to meet your account value. 2 Take a free withdrawal You can withdraw up to 10% of your contract value each year, starting year one without charge. Your annuity contract has a surrender charge period, which is from the time you purchase your annuity to start taking income. It s usually between five and 10 years. As long as you follow the contracts surrender charge provisions, you won t need to pay surrender charges. But if you take more than 10% of your contract value per year before the end of the surrender charge period, it may be subject to surrender charges and a Market Value Adjustment, which is a positive or negative adjustment based on the current interest rate environment. Find protection for the years ahead Your fixed indexed annuity has built-in protection for you and your loved ones. A safety net if the unexpected happens If you experience any qualifying medical issues, you can have access to your money without charge after the first year. A death benefit for your heirs Before your contract is annuitized, any remaining contract value or guaranteed minimums will pass income tax-free to your beneficiaries. 3 Annuitize to receive income payments Because fixed indexed annuities are designed to provide income, you can annuitize your contract and receive income payments guaranteed for life or for a certain period of time. You could also opt to extend your income payments beyond your lifetime so that your spouse, child or designated beneficiary can receive income when you re not there. 8

9 Why a fixed indexed annuity? Ask Lynn Lynn wants to increase her retirement savings and feel confident about her future. But she s concerned about volatility and isn t comfortable now with market risk. What she likes about a fixed indexed annuity She can protect her savings from market risk and find growth opportunities to help her accumulate more for the future. Her annuity even offers account options that can help her capitalize on volatile market conditions. Ask Brooke and Randy Brooke and Randy look forward to their retirement years. They plan to travel the world, and realize that once they stop working, they ll need sufficient income to enjoy their lifestyle. They want to boost their savings without taking any risks. What they like about a fixed indexed annuity At this point in their lives, they don t need to hit it out of the park if the market rises. They re happy that they have a solution that can give them some of the gains without risk of market losses. And they can add an optional income feature to their annuity to provide the retirement income they want. Ask Ana and Rick Ana and Rick are retired grandparents who want to provide an inheritance to their children. Over the years they ve saved a lot. But they remember the days when interest rates were higher, and their savings grew considerably. Ana and Rick would like to accumulate more, but they re not sure when interest rates will rise again. What they like about a fixed indexed annuity They re no longer concerned about interest rate uncertainty. They found a solution that offers principal protection and the potential of higher interest rates. Plus, their money will grow tax-deferred, and this can help them create a legacy for their heirs. Ask Shirley Shirley wants to retire in 10 years, but she s concerned because she s on her own. Shirley doesn t have a pension plan just her retirement savings and Social Security benefits. What she likes about a fixed indexed annuity It s a way to help insure her future retirement income by giving her a guaranteed source of income. She also feels assured that if she should become seriously ill, she can have access to her money if she needed it. 9

10 Take the next step for your future Are you retired? If not, when do you plan on retiring? Yes No What is your primary goal for your retirement? How do you feel about taking risks with your savings? I want growth and am willing to accept losses. I'd prefer to minimize losses I do not want to lose any of my savings. How do you feel about what your savings are currently earning? I am pleased with my earnings. I wish I could earn more. Would you be interested in earning more if you could protect your principal? Yes No Do you think you ll have sufficient retirement income? Yes No What have you done so far to prepare for your retirement? Let me show you how you can help meet your retirement goals. Please provide the following information. I will contact you to schedule an appointment. Name: Phone: How would you prefer to be contacted? What time is convenient for you? 10

11 Look for financial strength Because you re relying on guarantees to help protect you in retirement, ask your advisor about the financial strength of the insurance company issuing the fixed indexed annuity. You want to make sure they can keep their promises, and their guaranteed benefits will be there when you need them. Guarantees are subject to the claims paying ability of the issuing company. Financial strength* The Lincoln National Life Insurance Company Lincoln Life & Annuity Company of New York A.M. Best A+ (2nd highest of 16) A+ (2nd highest of 16) Fitch A+ (5th highest of 19) A+ (5th highest of 19) Moody s A1 (5th highest of 21) A1 (5th highest of 21) Standard & Poor s AA (4th highest of 21) AA (4th highest of 21) * These ratings apply only to the claimspaying ability as of February 3, All ratings are subject to revision or withdrawal at any time by the rating agencies. The ratings are not recommendations to buy, sell or hold our securities. For more information on ratings, including rating agency outlooks, see #223 on the 2015 Fortune 500 list by revenue, #24 by assets (June 4, 2015) #79 on the 2015 Barron s 500 list by sales growth and cash flow returns on investments (May 3, 2015) 11

12 Not a deposit Not FDIC-insured Not insured by any federal government agency Not guaranteed by any bank or savings association May go down in value 2016 Lincoln National Corporation LincolnFinancial.com Lincoln Financial Group is the marketing name for Lincoln National Corporation and its affiliates. Affiliates are separately responsible for their own financial and contractual obligations. LCN POD 7/16 Z03 Order code: FA-FIA-BRC001 Important information: Lincoln Financial Group affiliates, their distributors, and their respective employees, representatives, and/or insurance agents do not provide tax, accounting, or legal advice. Please consult an independent advisor as to any tax, accounting, or legal statements made herein. A fixed indexed annuity is intended for retirement or other long-term needs. It is intended for a person who has sufficient cash or other liquid assets for living expenses and other unexpected emergencies, such as medical expenses. A fixed indexed annuity is not a registered security or stock market investment and does not directly participate in any stock or equity investments, or index. The index used is a price index and does not reflect dividends paid on the underlying stocks. Contract may be referred to as policy or certificate in certain states (certificate may not be available in all states). The certificate is a group annuity certificate issued under a group annuity contract issued by The Lincoln National Life Insurance Company to a group annuity trust. The exact terms of the annuity are contained in the contracts and any attached riders, endorsements and amendments, which will control the issuing company s contractual obligations. For more information about the annuity, please also read the Client Guide, Disclosure Statement and Facts At-A-Glance, or contact your representative. Income taxes are due upon withdrawal and if withdrawn before age 59½, an additional 10% federal tax may apply. Withdrawals and surrenders may be subject to surrender charges and a Market Value Adjustment. There is no additional tax-deferral benefit for contracts purchased in an IRA, since they are already afforded tax-deferred status. Product and features are subject to state availability. Limitations and exclusions may apply. Not available in New York. Affiliated companies include broker-dealer/distributor Lincoln Financial Distributors, Inc., Radnor, PA, and insurance issuers The Lincoln National Life Insurance Company, Fort Wayne, IN, and Lincoln Life & Annuity Company of New York, Syracuse, NY.