Income Savvy
®
Turning your assets into retirement income.
Annuities are issued by American General Life Insurance Company (AGL) except in New York, where they are issued by The United States Life Insurance Company in the City of New York (US Life).
is designed to help you make informed decisions about your retirement income and help create a personalized income strategy that’s right for you.
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Intro
Retirement Challenges
Getting Started
Source: T. Rowe Price, Visualize Retirement workbook.
What is your vision of retirement?
Who are you going to spend time with?
What do you want to do, day to day, week to week?
Where do you want to live and travel?
When do you plan on retiring?
What is your sense of purpose in retirement?
Preparing for the challenges of retirement.
You may live longer than you expect.*
For a couple, both age 65:
50%
chance that one spouse will live to age 93
chance that one spouse will live to age 97
25%
Prices may rise more than anticipated.**
Hypothetical expenses
$122,222
(if history repeats itself)
$60,000
Health-care costs could continue to climb.
* Source: Society of Actuaries 2012 Individual Annuitant Mortality Tables, assumes a couple both age 65. ** Source: Wilshire Compass, 2020
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The market could experience a significant or prolonged decline.
S&P
DOW
NASDAQ
You may not know how much to safely withdraw from your savings and investments.
Today's "safe" withdrawal rate
%
?
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Source: Wade D. Pfau, Ph.D., CFA, www.retirement researcher/com/dashboard, April 2020. IMPORTANT: This strategy uses a 50% stock allocation and seeks a 90% chance that real wealth will not fall below 15% of its initial level by year 30 of retirement. Analysis assumes that withdrawals are made at the start of each year, retirees earn the underlying indexed market returns, and market return simulations are based on capital market assumptions starting from interest rate levels in April 2020. Market assumptions are defined at www.retirementresearcher.com/dashboard.
What is a “safe” withdrawal rate today?
Research shows that based on today’s interest rate and market environment, a sustainable withdrawal rate, adjusted for inflation, is:
Key assumptions: Portfolio allocation: 50% stocks/50% bonds; 30-year retirement
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0 1 2 3 4 5 6 7 8 9 0
.
1 2 3 4 5 6 7 8 9 0
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Past performance does not indicate future results. Sources (in order of boxes above): True Odds: How Risk Affects Your Everyday Life; 2012 Individual Annuity Mortality Tables; U.S. Department of Transportation 2020 (data as of 2017); Ned Davis Research, Inc., based on Dow Jones Industrial Average, daily closes, 1/2/1900 – 12/31/2019.
Protecting against the unexpected.
$
Home
Odds of major fire damage over the next 30 years: less than 1%
Asset
Value
Insured?
Life
Auto
401(k), IRA, other retirement investments
Probability of a 60-year-old male dying within 5 years: less than 4%
Only 1 crash for every 42 registered vehicles in the United States in recent years
Historically, a 20% stock market decline every 3 to 4 years
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Generating income from your savings and investments.
The Income Floor approach
Key benefits
May help provide a solid foundation for addressing retirement needs Minimum level of income (the “Income Floor”) is established to cover essential lifestyle expenses (mortgage, utilities, groceries, etc.)
Essential lifestyle expenses are covered with guaranteed income throughout retirement Discretionary lifestyle expenses may be covered by a combination of guaranteed and non-guaranteed income, based on personal preference and comfort level
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The Income Floor Approach
The Retirement Needs Pyramid
Provide for the financial security of your loved ones, along with donations to charities
Expenses over which you may have more choice
Daily living expenses, such as housing, food, transportation, health care
Generally funded with investments or life insurance — may involve the use of trusts and other wealth transfer strategies
May be funded with savings and investments — or with income from guaranteed sources
Funded with income from guaranteed sources including Social Security, pensions and annuities
Discretionary lifestyle expenses
Essential lifestyle expenses
Legacy Plan
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Getting started.
Identify your guaranteed income sources.
Guaranteed sources:
Non-guaranteed sources:
Social Security Pension Annuity
Savings and investments Part-time job Rental income
An Income Savvy plan is built on a foundation of guaranteed income.
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Assumptions: $1,000 monthly benefit available at an assumed Full Retirement Age of 66 and 6 months. Your Full Retirement Age may be different. Visit socialsecurity.gov for details. Note: Amounts shown do not reflect any cost-of-living adjustments. 1. Percentage reduction varies depending on your year of birth and Full Retirement Age. The reduction is 5/9 of one percent for each month before your Full Retirement Age, up to 36 months. If the number of months exceeds 36, then the benefit is reduced 5/12 of one percent per month in excess of 36. 2. If you were born in 1943 or later, the delayed retirement credit is 8% each year. Credits are pro-rated for partial years. Source: socialsecurity.gov, 2019
Determine your Social Security strategy.
Start collecting early or wait?
For example, if you start collecting early — prior to your Full Retirement Age and you were born in 1957, benefits will be reduced by up to 27.5%.¹
Waiting
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$725
$833
$900
$1000
$1040
$1120
$1200
$1280
63
64
65
67
68
69
70
66 and 6 months
FRA
Starting early
If you wait and start collecting after Full Retirement Age and you were born in 1957 or later, benefits will be increased by up to 28%.²
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If you’re covered by a pension, obtain an estimate of benefits.
Today, only about 1 in 4 Baby Boomers expects significant income from an employer-provided pension.*
Here are some questions to ask:
At what age are my benefits available? What are my payout options? Do I have the option for an income stream that lasts for as long as I live, while providing benefits to my surviving spouse if I should die first? What are the estimated benefit amounts?
Source: Insured Retirement Institute, “Baby Boomer Expectations for Retirement 2018”
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Determine your essential and lifestyle expenses.
Sample hypothetical income and expenses for illustration purposes only
Housing
e.g., mortgage payments, rent, insurance, property tax
$15,000
Annual cost
Utilities
e.g., gas, water, electricity, telephone, cable
$3,000
Food / Groceries / Meals
$6,000
Transportation
e.g., car payments, gas, car insurance, maintenance
Personal
e.g., clothing haircuts, dry cleaning, toiletries
$2,000
Health care
e.g., Medicare premiums, supplemental insurance, prescriptions and other out-of-pocket expenses
Life, disability and long-term care insurance
Income taxes
e.g., federal, state
$4,000
Annual essential lifestyle expenses
$45,000
Entertainment
e.g., movies, theater, sporting events and restaurants
$7,200
Travel and recreation
e.g., hotels, airfare and RV/boat expenses
e.g., golf, health club and yoga
Memberships
$1,200
Gifts and donations
$600
Annual discretionary lifestyle expenses
Total annual expenses (Essential lifestyle + discretionary lifestyle)
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Determine your annual guaranteed income.
Social security
Guaranteed sources of retirement income
Annual income
$25,000
$0
Pensions
Other
Total annual guaranteed income
e.g., guaranteed lifetime withdrawals or annuity payments
Annuities
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See if you’re facing an income gap.
- $20,000
- $35,000
Annual guaranteed income
Total annual expenses
Essential lifestyle income gap
Overall income gap
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Generating more protected lifetime.
Annuities can provide you with an additional stream of protected lifetime income to help enhance your retirement income security.
An investment in a variable annuity is subject to risk, including possible loss of principal. Investment values of variable products fluctuate so that investment units, when redeemed, may be worth more or less than their original cost. Income annuities, such as immediate annuities and deferred income annuities, permanently convert principal into a guaranteed income stream. Be sure to ask your financial professional for complete details about the annuity you may be considering, including limitations and risks.
OTHER SAVINGS AND INVESTMENTS
SOCIAL SECURITY AND PENSIONS
REPOSITION ASSETS
ANNUITIES
Non-guaranteed income sources
Guaranteed income sources
RECAP
What challenges do you need to be prepared for?
Getting started — identifying expenses and sources of income.
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Income Savvy — Next Steps.
Be Income Savvy.
Work with your financial professional today to schedule a complete retirement income evaluation and strategy session.
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Important information.
CDs are FDIC insured and offer a fixed rate of return if held to maturity. Money market instruments generally offer stability and income, but an investment in these securities is not insured or guaranteed by the FDIC or any other government agency. Government bonds and Treasury bills are guaranteed by the U.S. Government as to the timely payment of principal and interest and, if held to maturity, offer a fixed rate of return and fixed principal value. Bonds are subject to risks including interest rate or default fluctuations (credit risk). High-yield bonds are subject to a higher risk of default and generally pay a higher yield than investment grade bonds. Mutual funds and equities (stocks) are subject to risk, including the possible loss of principal. Dividend-paying stocks can provide a tax advantage. Qualified dividends are currently taxed at the lower longer-term capital gains rate rather than at the higher rate for an individual’s ordinary income. Variable annuities offer professional money management, flexible income options and beneficiary protection. In the Accumulation phase, they can help clients build assets on a tax-deferred basis. In the Income phase, they can provide clients with guaranteed income through standard or optional features. Unlike many other types of investments, variable annuities offer insurance features for which clients pay certain fees and charges, including a separate account fee, a contract maintenance fee, expenses related to the operation of the variable portfolios, and the costs associated with any optional features, if elected. With certain variable annuities, a premium based charge and early withdrawal charge also apply. Partial withdrawals may reduce benefits available under the contract as well as the amount available upon a full surrender. Withdrawals of taxable amounts are subject to ordinary income tax and, if taken prior to age 59½ , an additional 10% federal tax may apply. Optional income guarantees are subject to additional fees, withdrawal parameters, investment requirements and other limitations. An investment in a variable annuity is subject to risk, including the possible loss of principal. The variable annuity contract, when redeemed, may be worth more or less than the total amount invested. Annuities offer the opportunity for tax deferral. Keep in mind, any investment in a retirement account (such as an IRA) automatically receives the benefit of tax deferral. An investment in an annuity provides no additional tax-deferred benefit beyond that provided by the retirement account. Index annuities are not a direct investment in the stock market. They provide the potential for interest to be credited based in part on the performance of the specified index, without the risk of loss of premium due to market downturns or fluctuations. Index annuities may not be suitable or appropriate for all clients.
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All contract and optional benefit guarantees, including any fixed account crediting rates or annuity rates, are backed by the claims-paying ability of the issuing insurance company. They are not backed by the broker/dealer from which this annuity is purchased. This information is general in nature, may be subject to change and does not constitute legal, tax or accounting advice from any company, its employees, financial professionals or other representatives. Applicable laws and regulations are complex and subject to change. For advice concerning your situation, consult your attorney, tax advisor or accountant. Products and features may vary by state and may not be available in all states. The purchase of an annuity is not required for, and is not a term of, the provision of any banking service or activity. Annuities are issued by American General Life Insurance Company (AGL), Houston, TX, except in New York, where they are issued by The United States Life Insurance Company in the City of New York (US Life). Variable annuities are distributed by AIG Capital Services, Inc. 21650 Oxnard Street, Woodland Hills, CA 91367-4997, 1-800-445-7862. AGL, US Life and ACS are members of American International Group (AIG). M6060CPT.1 (10/20)
Variable annuities are sold by prospectus only. The prospectus contains the investment objectives, risks, fees, charges, expenses and other information regarding the contract and underlying funds, which should be considered carefully before investing. Please contact your financial professional or call 1-800-445-7862 to obtain a variable annuity prospectus. Please read the prospectus carefully before investing.
Not FDIC or NCUA/NCUSIF Insured
May Lose Value • No Bank or Credit Union Guarantee Not a Deposit • Not Insured by any Federal Government Agency
