Planning for a Comfortable Retirement

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1 Planning for a Comfortable Retirement How deferred income annuities can help

2 TABLE OF CONTENTS What Does Retirement Look Like? 2 Saving for Retirement 4 How Much Will You Need? 6 Making Your Money Last 8 Deferred Income Annuity Overview 0 Should I Look into a Deferred Income Annuity? 2 Types of Deferred Income Annuities 4 Funding Your Annuity 6 Choosing the Right Company 8 Making an Informed Decision 20

3 What Does Retirement Look Like? The retirement landscape today is very different from past generations. More than ever, Americans are unsure of what the future holds, especially when it comes to living the retirement we imagine. This booklet addresses some of today s challenges, offers a few tools and provides useful information about the role a deferred income annuity could play in your financial future. Every person s retirement is different. Some may travel, others take on new hobbies, and some may tackle a long-desired renovation. But one thing s the same for everyone you need to feel financially secure to support the retirement you imagine. It s difficult to know how much you ll need to retire comfortably. When you consider that we re living longer than ever, pensions are less common, and we have more and more expensive necessities such as cell phones and cable television, it s clear that you ll need more in your personal savings than your parents ever needed. Although you can t predict the future, you can prepare for it. With the AARP Lifetime Income Program from New York Life Insurance and Annuity Corporation, you can have a better chance of enjoying the independent, financially secure retirement that you want. This booklet can help you make more informed decisions, and help you decide if a deferred income annuity should be part of your retirement plan. 70% Nearly 70% of boomers are not confident they will hae enough money to last through retirement. IRI Boomers Expectations for Retirement

4 When it comes to saving for retirement, some of us may procrastinate because it seems like there s plenty of time. Or we postpone putting money away because of more immediate needs like everyday living costs or paying for our children s education. The reality is that it s never too late to start saving, and with the right financial vehicle, a little bit could go a long way. Saving for Retirement One of the biggest challenges we face is how to pay for retirement. Start by thinking now about what type of retirement you want, and what that might cost. The more you set expectations, the better you can plan and prepare to take the next steps that will shape your retirement. How could you save more? Lifestyle adjustments and financial choices are a great starting point to set you up for a comfortable retirement. Look at your spending to see where you could cut back. Moving money into something that provides financial stability in retirement, like a lifetime income annuity, may be an option. 50% Almost 50% of your retirement income will be spent on housing and healthcare costs. LIMRA Retirement Reference Book

5 How Much Will You Need? Have you calculated how much you ll need for retirement? Less than half of Americans have. In fact, most Americans are behind on saving enough for a comfortable retirement... about 75% of Americans over the age of Are you saving enough? 3 8 times your pay What you should have saved at age 60 0 times your pay The average employee savings at age 67 IRI Boomers Expectations for Retirement Kirkham, Elyssa. in 3 Americans has saved $0 for retirement. Times.com. Time. March 4, Fidelity Viewpoints. How much do I need to save for retirement? Fidelity.com. Fidelity. March 6, How can you get on the right track to retire comfortably, and on your terms? First, it s never too late to start planning. And many experts suggest looking for a product that will provide a steady source of income you can count on for life to help protect against the risk of outliving your money. Unfortunately, we can t predict how long we ll need our savings to last, because we don t know how long we ll live. But the simple calculation below is a good start to helping you figure out how much you ll need to save to reach your retirement income goal. See how much more you need to save Monthly Expenses (in retirement) Housing and Utilities $ Groceries + $ Insurance (health and other) + $ Misc. Expenses + $ TOTAL = $ Monthly Income (in retirement) Social Security $ Pension + $ Other + $ TOTAL = $ Income Gap A. Total Monthly Expenses $ B. Total Monthly Income $ MONTHLY GAP (A minus B) = $ Savings Needed C. Annual Gap (monthly gap x 2) = $ D. Years in Retirement x TOTAL (multiply C and D) = $ This is how much you still need to save to help cover your income gap This is a basic tool to help you measure your progress. For a comprehensive review, consult a financial advisor before making any decisions. 7

6 Making Your Money Last If you re like most people you re counting on using money from a 40(k), IRA, CD or other savings, along with your monthly Social Security check, to maintain your standard of living. And you ll manage your money as you go and cut back when needed. But that doesn t always give you enough income and there s no guarantee the money will last. That s why it makes sense to look for something that will guarantee some of your savings will last a lifetime. Retiring comfortably solely on Social Security and a company pension just doesn t seem to happen anymore. In fact, most of us will need to retire with even more in our personal savings than past generations. Consider adding a product that provides guaranteed income to your retirement plan, such as a deferred income annuity. It can be a simple way to set aside money that will provide a guaranteed source of lifetime income you can count on in retirement. You buy a deferred income annuity now with part of your savings. Then when you retire, it will turn into a monthly payment that will continue for life. You can even add more money as often as you like before your income begins. It s an easy way to save for retirement gradually, to help you achieve your retirement income goals. And because the income is guaranteed for life, you don t have to worry about outliving your money. Asset allocation among U.S. investors 40 and over % 23% Cash Fixed Income 20% Other 2 4% Equities Legg Mason Global Assesment Survey Includes investment real estate and non-traditional gold/ precious metals. 8 9

7 Deferred Income Annuity Overview A deferred income annuity can provide income for life. With traditional savings, you could outlive the assets and your money may not be protected from loss. This annuity can complement Social Security, investments and other savings by adding more stability and predictability to your retirement income. 0 What a deferred income annuity is This is an insurance product that provides a future steady stream of income. It helps protect against the risk of outliving your savings because, when your income begins, the amount you receive every month is guaranteed to continue for the rest of your life no matter how long you live. How it works The idea is actually quite simple. By purchasing a deferred income annuity, you convert a portion of your retirement funds into a regular source of income that will begin several years later. You buy the deferred income annuity now, with a single lump-sum purchase, or through a series of smaller purchases. In exchange, starting on the date you choose, you ll receive income for life sent by check or directly deposited into your bank account from the issuing company. The money you use to buy the annuity can come from nearly any source, such as savings and CDs or 40(k)s and IRAs. The amount of future lifetime income you ll receive is based on a number of factors, such as: Total amount put into the annuity (the more you put in, the higher your income) Your age when you purchase the annuity When you choose to start receiving income (the longer you wait, the higher the payment will be) Type of deferred income annuity chosen (see page 5) Your gender Interest rates at time of purchase Keep in mind that you can t have access to the amount you invested until you start receiving it in premium payments.

8 How can a Deferred Income Annuity help? Your retirement could last longer than you think, so you may need a source of steady, dependable income in addition to Social Security to help cover your expenses. A deferred income annuity will help you turn some of your money into a pensionlike stream of income that will last your entire retirement. The income payments you receive from a deferred income annuity are guaranteed to continue no matter how long you live if you live a long life, the total income you receive in the future can significantly exceed what you paid into the annuity. And it s unlike some other financial products, because you can t outlive the income it will provide in retirement, so it can give you more money over time. The annuity payments are also fixed for life, so you always know exactly how much you will have to help with expenses. The amount you receive each month will not go down, regardless of the current interest rate environment or volatility in the stock or bond markets. Of course, as with any financial decision, it s up to you to decide if a deferred income annuity would be something that can better prepare you for retirement. See page 7 for some important things to consider. Life expectancy At Age years old 86.0 years old 90.8 years old 85.3 years old 87.8 years old 9.9 years old Social Security Administration, estimates from the 206 Trustees Report. Retrieved from ssa.gov.oact/stats/table4 This is an annuity product, not a pension plan. Annuity income guarantees are backed by the claims-paying ability of New York Life Insurance and Annuity Corporation. 2 3

9 Types of Deferred Income Annuities Life Only This type of deferred income annuity pays a regular income amount for the rest of your life. After you pass away, no payments will be made to a beneficiary. Lifetime Income with Period Certain This type of deferred income annuity guarantees to pay you a future income for life or for a specific guarantee period, whichever is longer. If you die before the end of the guarantee period you choose (usually between 0 and 30 years), your beneficiaries continue to receive your income checks until the time period ends. Lifetime Income with Cash Refund With the cash refund option, you are assured the money you use to purchase the deferred income annuity will not be lost. If you pass away before your income starts or before receiving the full amount paid in, your spouse or other beneficiary will receive the remaining balance. There are many types of deferred income annuities offered by insurance companies which guarantee future lifetime income. The type you choose depends on your individual situation. Most deferred income annuities are available as single life or joint life annuities. The single life option provides a steady future income to you only for the rest of your life. A joint life annuity provides steady, future lifetime income for both you and one other person (usually a spouse or domestic partner), until you both pass away. 4 5

10 Funding Your Annuity To buy or add to an annuity, you can combine money from different sources as long as the money comes from the same type of accounts, either pre-tax or after tax. You cannot mix funds from both types of accounts in one annuity. The money you use to purchase an annuity can come from any number of sources. What you use depends on your savings. Common sources include: Checking and savings accounts CDs Brokerage accounts IRAs 40(k)s Pension plan payouts Before you move assets, you should always weigh the benefits and potential disadvantages of a deferred income annuity with your current investments. Additionally, indirect IRA and Roth IRA rollovers are limited to one per year (regardless of the number or types of IRAs you own). IMPORTANT: If you fund your annuity with money that s already been taxed (excludes Roth IRAs), you may be able to access some portion of your future payments after your income payments begin. Please consult your tax advisor for more information. PRE-TAX ACCOUNTS: These include accounts, such as IRAs and qualified retirement accounts offered by employers, such as 40(k)s, where you don t pay taxes on investment gains until they are withdrawn. AFTER TAX ACCOUNTS: Accounts that hold money on which you have already paid taxes, such as bank accounts and CDs. 6 7

11 Choosing the Right Company It s always a good idea to take some time to research the company you will entrust with your money and your future retirement security. When you re looking to purchase an annuity, remember that the annuity is only as strong as the company that stands behind it. Their financial strength and how long they ve been in business can make a difference. By purchasing a deferred income annuity through the AARP Lifetime Income Program, you can rest easy knowing your future income is backed by the claims- paying ability of New York Life Insurance and Annuity Corporation. This is a wholly owned subsidiary of New York Life Insurance Company an industry leader for more than 70 years. New York Life Insurance and Annuity Corporation is also the nation s number-one provider of guaranteed lifetime income annuities and has the highest possible ratings for financial strength currently awarded to any life insurer from the leading independent rating services. A++ Superior A.M. Best (Highest rating) AA+ Very Strong Standard & Poor s (Second-highest rating) Ratings as of 02/0/7. AAA Exceptionally Strong Fitch (Highest rating) Aaa Exceptional Moody s Investors Service (Highest rating) Source: LIMRA, current ranking. Based on premium amount each year since

12 Making an Informed Decision At New York Life, we re dedicated to providing the information and assistance AARP members need to make informed decisions that will help shape their retirement. That s why we re available by phone to answer your questions about this annuity, so you can decide if it s right for you. Let us help. We want to ensure you receive the personal assistance you need when it comes to your retirement. We re available to answer your questions about deferred income annuities and further explain how one works. You can also request a no-obligation quote to find out what your guaranteed monthly income could be. We re here to help. Call New York Life at

13 This material is general in nature and is being provided for informational purposes only. It was not prepared, and is not intended, to address the needs, circumstances and/or objectives of any specific individual or group of individuals. New York Life and its affiliates are not making a recommendation to purchase any specific products. For advice regarding your personal circumstances, you should consult with your own independent financial and tax advisors. The AARP Lifetime Income Program is underwritten by New York Life Insurance and Annuity Corporation (NYLIAC), a Delaware Corporation, Newark, DE 973. Guarantees are subject to contract terms, exclusions and limitations, and the claims-paying ability of NYLIAC. This contract is irrevocable, has no cash value and no withdrawals are permitted prior to the income start date. Income payments are guaranteed to continue for the entire life of the annuitant. AARP membership is required for Program eligibility. Specific products, features and/or gifts not available in all states or countries. (Group policy form DIA-0.) NYLIAC pays royalty fees to AARP for the use of its intellectual property. These fees are used for the general purposes of AARP. AARP and its affiliates are not insurers. New York Life Insurance and Annuity Corporation is a wholly owned subsidiary of New York Life Insurance Company. AARP has established the AARP Annuity Trust to hold group annuities for the benefit of AARP members. G07-00