Financial Intelligence. Produced Exclusively for Members of the Senior Executives Association

Transcription

1 Financial Intelligence Produced Exclusively for Members of the Senior Executives Association

2 Mike Miles Founder and Principal Advisor, Variplan, LLC Certified Financial Planner Registered Investment Advisor SEA Benefit Provider Since 1999 Federal Times Money Matters Columnist Ask the Experts Panelist at

3 Advanced Decision Support Services Comprehensive Financial Planning and Decision Support Integrated Investment Advice Fiduciary Engagement Experts in Federal Benefits Fair and Reasonable Fees

4 SEA Member Benefits $49 Benchmark Portfolio Review Save $250 Free Hour of Consulting / Analysis Save $205 $250 Vantage Discount Save $250 Questions to me at mmiles@variplan.com

5 Contents 1. Market Review 2. Tactical Recommendations 3. Annuities The Pros and Cons 4. Questions & Answers

6 Financial Intelligence How to Submit Your Questions

7 Market Review Stocks (6 months)

8 Market Review Stocks (5 Years)

9 Market Review Stocks (20 Years)

10 Market Review - Interest Rates (20 Years)

11 Market Review Stocks vs. Bonds (1 Year) Bonds Stocks

12 Market Review Stocks vs. Bonds (5 Years) Stocks Bonds

13 Tactical Recommendation G G F C, S, I F C, S, I

14 Financial Intelligence Annuities The Pros and Cons

15 Financial Planning and Management Goals Resources Performance Management Success Wants Needs Guaranteed Annuities Insurance At Risk Liquid Assets Cash Marketable Securities Illiquid Assets Real Estate Business Interests Risk Return Action Constraints Decisions Analysis Assumptions Experience Probabilities Estimates Cash Flow Wealth Inflation & Taxes

16 Annuity Insurance Contract Premium Payment Guaranteed Income

17 Types of Annuity Contracts Immediate Deferred Fixed Variable

18 Immediate Fixed Annuity Should be the Benchmark Against Which the Alternatives are Compared

19 Income Guarantees Single Life Joint Life Options

20 Payment Amount Age Sex Health Income Guarantees Interest Rate Index

21 Example Age = 60 Sex = Male Health = Average Premium = $100,000 Income Guarantees = Single Life Interest Rate Index = 2.00% $454 / Month

22 Payout Rate or Ratio Guaranteed Annual Payment Premium Amount

23 Payout Rate or Ratio $454 x 12 = $5,448 / Year $100,000 = 5.448%

24 Payout Rate or Ratio 5.448% Rate of Return!

25 Annuity Rate of Return Life Only Payout Period Age at Death Recovered Rate of Return 10 Years 70 $54, % 20 Years 80 $108, % 30 Years 90 $163, % 40 Years 100 $217, %

26 Annuity Rate of Return w/ Cash Refund Payment amount falls to $426 / Month Payout Period Age at Death Recovered Rate of Return 10 Years 70 $100, % 20 Years 80 $108, % 30 Years 90 $163, % 40 Years 100 $217, %

27 Rate of Return Cash Refund Option 0 Years

28 Invest and Withdrawal The Riskier Alternative

29 Expected Return Risk-Efficient Portfolios Efficient Frontier Aggressive Allocation C Fund S Fund 1 Large Cap Stock 1 Small Cap Stock Moderate Allocation Inefficient Conservative Allocation Risk

30 Moderately Conservative Investment Strategy Variplan Income Allocation 20.0% C Fund 7.5% S Fund 2.5% I Fund 10.0% G Fund 60.0% F Fund

31 Moderately Conservative Investment Strategy Variplan Income Allocation Expected 12-Month Return = 7.9% Standard Deviation = 7.2%

32 Moderately Conservative Investment Strategy Variplan Income Allocation Probability % Return %

33 Simulation Results 40 Years

34 Probabilities 40 Years Percentile Ending Value ROR 0 $3,015, % 10 $1,104, % 20 $873, % 30 $696, % 40 $584, % 50 $507, % 60 $408, % 70 $325, % 80 $232, % 90 $137, % 100 -$129, %

35 Invest and Withdraw $100,000, $5,448 / year, BT, 30/60/10 Allocation Payout Period Age at Death Confidence EEV 10 Years % $129, Years % $187, Years 90 99% $299, Years % $507,000

36 Immediate Fixed Annuity Pros Income Security Professional Management

37 Immediate Fixed Annuity Cons Loss of Control of Principal Potentially Lower Income Inflation Risk Reduced Estate Value

38 Consider an Immediate Fixed Annuity When You re Concerned About Control You re Concerned About Management Interest Rates Are High

39 Variplan Article Database

40 Financial Intelligence Next Month: Life Insurance October 12:00

41 Questions / Comments / Suggestions mmiles@variplan.com