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Sponsored by:
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Contact information:
Instructor Name
Phone
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Disclaimer
The ABC Retirement Planning Workshop is an educational program, and is not
intended to sell investment or insurance products, nor is it intended to provide
tax or legal advice. Consult with your tax advisor and/or legal counsel for
suitability for your specific situation.
Hypothetical and/or actual historical returns contained in this presentation are
for informational purposes only and are not intended to be an offer, solicitation,
or recommendation. Rates of return are not guaranteed and are for illustrative
purposes only.
This presentation is for educational purposes only and is not intended to project
the performance of any specific investment. Past Performance is no guarantee of
future results. Any indices mentioned in this presentation are unmanaged and
not available for direct investment.
Securities offered through (BD Info). Insurance and annuity products are offered
through Dressander/BHC.
©2016 Dressander BHC Inc.; text and materials incorporate or adapt portions of Bat-Socks, Vegas and Conservative Investing ©2012 David P. Vick
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What Did You Get Out of Last Week?
• What is Conservative Investing
• Changing Perceptions About Investing
• Technology has Created a New ‘Ball
Game’
• Myths and Mistakes
• Perhaps There is a Need for a New Model
5
Investing at the speed of the internet…
6
The ABC Model of Investing
The New Model
7
The ABC Model Defined
Wall Street Pyramids and Risk Tolerance
Wall Street’s typical model of investing starts
with the “Pyramid of Assets” and moves on to
“Asset Allocation” models. These models
depend on the broker knowing your “risk
tolerance,” which is the degree of variability in
investment returns that an individual is willing
to withstand.
8
The ABC Model Defined
A Conservative Investor’s Dilemma
• Is your money safe from market losses?
• Are you beating CD’s?
5.1 Do you, the conservative planner, know how to allocate your
Conservative
wantcosts
thatyou
“insleepless
between
space”
money
to avoid theinvestors
volatility which
nights?
of bank-type savings and market risk assets.”
5.2
HowVegas
do you
currently
determine
“Bat-Socks,
& Conservative
Investing”
by David P. Vick which assets to use and why
you might use them?
9
The ABC Model of InvestingCategory A: Cash Assets
10
The ABC Model of InvestingCategory B: Fixed Principal Assets
5.6 When a planner uses the term “Fixed Income Asset”
what do you believe about the primary characteristic of
that asset?
11
The ABC Model of InvestingCategory C: Risk Growth Assets
5.7 What are some of the negative aspects of Column C
that concern you as you plan for retirement?
5.8 What are some of the positive aspects of Column C
that could help you as you plan for retirement?
12
SAMPLE CONSERVATIVE MODEL
10%
60%
30%
13
SAMPLE MODERATE/AGGRESSIVE
MODEL
10%
30%
60%
14
Create Your Own ABC Portfolio
?
10%
?
30%
?
60%
15
What is Your Greatest
Priority?
What are
you willing
to give up?
Gains?
Liquidity?
Protection?
5.10 How do the “risk-reward” trade-offs impact
your planning choices?
16
Let’s Review… Rule of 100
5.12 Think through your current financial plan. In what
ways would this help you re-allocate your portfolio? In
what ways would it not help you plan?
5.13 In what ways would the ABC Planning Model help
you in your financial planning?
17
Yellow Money Savings
18
Money Savings
• The goal of
Money?
• How much liquidity is right for you?
• The Two Yellow Money Categories
– Accessible with no penalties
– Accessible with minimal penalties
19
Money Savings
6.6 IS HAVING THE MAJORITY OF YOUR MONEY
LIQUID IMPORTANT TO YOU?
If not, then how much is
right for you?
(No right or wrong answers)
20
Do You Have What You
Think You Have?
Money Assets
21
Fixed Income Asset or
Fixed Principal Asset?
7.2 In the past, have you thought
bonds guaranteed principal? Explain
22
Fixed Income or
Fixed Principal Assets?
• What are Fixed Income Assets?
• Do Fixed Income Assets have
Protection of Principal?
• Have you or anyone you know ever
lost money in bonds?
• What is the ‘Bond Bubble’?
23
Money Assets
Is protecting your principal, or
some of your principal,
important to you?
24
Three Green Money Rules:
Green Money Rule #1:
Protect Your Principal
Green
Money
Rule
#2: Rules help when forming a
7.3
How do
the Green
Money
balanced,
portfolio?
Retainconservative
Your Gains
Green Money Rule #3:
Guarantee Your Income
25
Money Assets
What is your take on the value of Green
Money Column B?
Do you think it is important to protect a
portion of your assets or income?
26
What is an Annuity?
An annuity is an insurance product that pays
out income, and can be used as part of a
retirement strategy. Annuities are a popular
choice for investors who want to receive a
steady income stream in retirement.
“Ultimate Guide to Retirement”, CNNMoney
7.4 What are some of the negative aspects of
annuities you have heard about?
7.5 What are some of the positive aspects of
annuities you have heard about?
27
Different types of annuities
Types based on investing models and guarantees
– Variable Annuity
– Fixed Annuity
– Fixed Indexed Annuity
Types based on when annuity payments will be made
–
–
–
–
Immediate Annuity
Deferred Annuity
Single Premium Deferred Annuity (SPDA)
Flexible Premium Deferred Annuity (FPDA)
28
Different types of annuities
Variable Annuities
A variable annuity is a tax-deferred retirement
vehicle that allows you to choose from a
selection of investments, and then pays you a
level of income in retirement that is
determined by the performance of the
investments you choose.
“Ultimate Guide to Retirement”, CNNMoney
29
Different types of annuities
Variable Annuities
Offers market returns with some
protections.
“…the variable annuity puts the risk of the
principal on the investor, while the fixed
annuity puts the risk on the insurance
company.”
“Bat-Socks, Vegas & Conservative Investing” by David P. Vick
30
Different types of annuities
Variable Annuities
Option to choose from a varied amount of
side accounts which are much like mutual
funds. Though, not technically mutual
funds, you will pay management fees inside
these side accounts along with other fees
and expenses typical of variable annuities.
These expenses could range from 1.25% to
5% .
“Bat-Socks, Vegas & Conservative Investing” by David P. Vick, pg. 77
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Different types of annuities
Variable Annuities
Sample variable annuity expenses:
M&E Charges
1.25%
Enhanced Death Benefit
.75%
Income Benefit
.75%
Fund Management Fees
.65%
Total
3.4%
7.6 In what ways might it be an advantage or
disadvantage to use a variable annuity in your
portfolio?
32
Different types of annuities
Fixed Annuities
Fixed annuities are essentially CD-like
investments issued by insurance companies.
Like CDs, they pay guaranteed rates of interest,
in many cases higher than bank CDs. Fixed
annuities can be deferred or immediate. The
deferred variety accumulate regular rates of
interest and the immediate kind make fixed
payments.
“Ultimate Guide to Retirement”, CNNMoney
33
Different types of annuities
Fixed Indexed Annuities
Provides you with the best features of a traditional fixed
annuity - a guarantee of principal. Unlike most securities or
mutual funds where your account balance can fluctuate due
to market performance, premium deposited into a fixed index
annuity is guaranteed to never go down due to market
downturns. A contract owner of a fixed index annuity
participates in market-indexed interest without market-type
loss.
Fixedindexannuity.com
34
An FIA Simple Four Year Graph
12%+
8%+
4%
10%
0%
4%
4% cap
Year One
Year Two
-40%
Year Three
Year Four
6%
15%
Items to Consider:
___Surrender Duration ___Liquidity Options ___Caps ___Income Riders ___Crediting Methods ___Other
35
Actual FIA Historical Performance*
*DISCLOSURE: This is a Graph that reflects the actual interest crediting methods used by a specific insurance company from a
time period beginning 09/30/1998 and ending on 9/30/2016. Individual results may vary and be dependent upon crediting
methods, caps and participation rates. This is for illustration purposes only to show how a Fixed Index Annuity may have
performed over a specific period of time. Chart Source: American Equity .
S&P 500 is not available for direct investment
36
FIA Basics
7.7 How does the structure of an Indexed
Annuity protect your principal and retain
your gains?
7.8 Would you be upset with “0%” in year
two?
7.9 Would you be upset if you did not get
a greater return in year four when the
market went up 15%?
37
FIA CREDITING METHODS
FIA Guarantee Example:
Premium
$100,000
87% of Premium
$ 87,000
Minimum Interest
2%
Number of Contract Years
10
Minimum Guaranteed Balance $106,053
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FIA CREDITING METHODS
•
•
•
•
•
•
Fixed Rate
Annual Point to Point with a Cap
Annual Point to Point with Participation Rate
Monthly Point to Point with a Cap
Monthly Average with a Cap or Participation Rate
Multi-Year with a Mix of Interest and Percent of the
Market
7.10 Which of the crediting methods most
appeal to you?
39
Additional FIA Points
• Taxes
• Fees with FIAs
• Liquidity with FIAs
7.11 Compare an Indexed Annuity’s
liquidity to other assets.
40
Additional FIA Points
Planning for Income – Withdraw or Annuitize the
Annuity?
Annuitizing means you convert the pool of money
you’ve accumulated in your contract into a stream of
income, which typically is paid to you monthly. If you
don’t annuitize, you can take your money out in a
single lump sum or in multiple payments. The major
difference is what happens to the account value when
you choose either of these two options.
41
Additional FIA Points
Guaranteed Withdrawal Benefits
Accumulation Value
The current value of your annuity’s cash account
which includes any bonus and all interest credits
to date, less any withdrawals.
Income Account Value
The current value of your annuity’s income
account which includes any bonus and all interest
credits to date, less any withdrawals. Note: there
is no cash value here.
42
Additional FIA Points
Guaranteed Withdrawal Benefits
Current Surrender Value
The current value of your annuity’s cash account which
includes any bonus and all interest credits to date, less any
withdrawals, and minus any surrender charges that would
apply if you chose to liquidate.
Guaranteed Minimum Surrender Value
The current value of your annuity’s cash account which
includes any bonus and the minimum guaranteed interest
credits to date, less any withdrawals, and minus any surrender
charges that would apply if you chose to liquidate.
43
Additional FIA Points
Guaranteed Withdrawal Benefits
Guaranteed Withdrawal Percentage:
Ages 60 – 69 4-5%
Ages 70 – 79 5-6%
Ages 80 & up 6-7%
•
Disclosure: Past performance is no guarantee future results. Crediting rates including caps for FIA’s can change and are determined
by the insurance companies at the time of issue. Future performance cannot be predicted or guaranteed. FIA’s are not registered as a
security with the SEC and is not invested directly in any stock, bond, or security investment. FIA products, features, and benefits vary
by state.
•
Annuity Contracts are products of the insurance industry and are not guaranteed by any bank or insured by the FDIC. When
purchasing a fixed indexed annuity, you own an annuity contract backed by the insurance company, you are not purchasing shares of
stocks or indexes. Product features such as interest rates, caps, and participation rates may vary by product and state and may be
subject to change. Surrender charges may apply for early withdrawals. Be sure to review the specific product disclosure for more
details. Guarantees are based on the financial strength and claims paying ability of the insurance company.
•
This information is not intended to give tax, legal, or investment advice. Please seek advice from a qualified professional on these
matters.
•
Lifetime income benefit riders are used to calculate lifetime payments only. The income account value is not available for cash
surrender or in a death benefit. Excess withdrawals may reduce lifetime income and may incur surrender charges. Fees may apply.
Guarantees based on the financial strength and claims paying ability of the insurance company. See specific product disclosure for
more details.
•
44
Additional FIA Points
Guaranteed Withdrawal Benefits
Example:
Guaranteed Income Account Growth Rate: 6.5%
Bonus: 8%
Premium: $100,000
Age at Issue: 60
Age Withdrawals Chosen: 70
Guaranteed Withdrawal Percent: 6%
Income Account Value: $202,731
Guaranteed Annual Withdrawal Benefit: $12,164
45
Additional FIA Points
7.12 In what ways would you see a
GWB enhancing your situation?
46
Are You Good at
Forecasting?
Money Investing
47
Definitions: DOW and S&P 500
What is the 'Dow Jones
Industrial Average - DJIA‘
What is the 'Standard & Poor's
500 Index - S&P 500‘
The Dow Jones Industrial Average
(DJIA) is a price-weighted average of
30 significant stocks traded on the
New York Stock Exchange (NYSE)
and the NASDAQ. The DJIA was
invented by Charles Dow back in
1896.
Often referred to as "the Dow," the
DJIA is one of the oldest, single mostwatched indices in the world and
includes companies such as General
Electric Company, the Walt Disney
Company, Exxon Mobil Corporation
and Microsoft Corporation. When the
TV networks say "the market is up
today," they are generally referring to
the Dow.
The Standard & Poor's 500 Index
(S&P 500) is an index of 500 stocks
chosen for market size, liquidity and
industry grouping, among other
factors. The S&P 500 is designed to
be a leading indicator of U.S.
equities and is meant to reflect the
risk/return characteristics of the large
cap universe.
Companies included in the index are
selected by the S&P Index
Committee, a team of analysts and
economists at Standard & Poor's.
The S&P 500 is a market value
Source: Investopedia.com
weighted
- each
stock's
The Dow and theindex
S&P 500 are
not available
for direct weight
investment.
isPastproportionate
to its
market
performance is no indication
of future
results. value.
48
Red Money Language
Do you need a degree in finance to
understand the following:
• Systematic Risk
• Variance
• Volatility
• Beta
• Alpha
• Standard Deviation
• R- Squared
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Red Money Language
• Systematic Risk, Volatility, and Variance
Probability of loss common to all businesses
and investment opportunities, and inherent in
all dealings in a market. Also called market
risk, it cannot be circumvented or eliminated
by portfolio diversification but may be
reduced by hedging.
www.businessdictionary.com/definition/systemic-risk.html#ixzz2gUmxFwHJ
9.2 How does “systematic risk” make you feel?
50
Red Money Language
Beta, Alpha, Standard Deviation, and R-Squared
• Beta is a measure of the volatility, or systematic risk, of a
security or a portfolio in comparison to the market as a whole.
• Alpha gauges the performance of an investment against a
market index used as a benchmark, .
• Standard deviation is a measure of the dispersion of a set of
data from its mean. The more spread apart the data, the higher
the deviation
• R-Squared is a statistical measure that represents the
percentage of a fund or security's movements that can be
explained by movements in a benchmark index
www.investopedia.com
51
http://www.forbes.com/sites/richardfinger/2013/04/15/five-reasons-your-mutual-fund-probably-underperforms-the-market/#7ac1863db6d8
http://www.ibtimes.com/active-funds-vs-index-funds-2014-managed-mutual-funds-underperform-passive-funds-1772962
Past performance is not an indicator of future results
52
Stock Type Risk & Bond Type Risk
As you look at Column C Red Risk
Money, what percent of your Red Risk
Money do you want in stock-type risk
and what percent do you want in bondtype risk?
53
Stock Type Risk & Bond Type Risk
Red Money Rule:
“Unless you have over two million dollars in
investible assets you probably want to stay
away from individual stocks.” If you are
market savvy and don’t consider yourself a
conservative investor, you may not agree
with this Red Money Rule.
*Bat Socks, Vegas & Conservative Investing, David P. Vick, pg. 98
8.3 Do you agree or disagree with this Red
Money Rule? Why?
54
WHO CHOOSES YOUR ASSETS?
• Yourself, through self-directed
accounts?
• Financial Advisor/Broker?
• Charles Schwab, Fidelity Investments,
etc.?
• Registered Investment Advisor?
• Why?
55
Tactical Management vs. Buy and Hold
•
Tactical management is “an active management
portfolio strategy that rebalances the percentage
of assets held in various categories in order to
take advantage of market pricing anomalies or
strong market sectors.”
Investopedia.com
•
The “buy & hold” strategy is “a passive investment
strategy in which an investor buys stocks and
holds them for a long period of time, regardless of
fluctuations in the market.”
Investopedia.com
56
Tactical Management vs.Buy and Hold
8.4 What are the positives and
negatives about the “Buy and
Hold” Style?
57
What is Tactical
Tacking or coming about is a sailing
maneuver by which a sailing vessel (which is
sailing approximately into the wind) turns its
bow through the wind so that the direction from
which the wind blows changes from one side to
the other.
58
Strategic Allocation, Tactical Management
This is a graphical representation of a tactical asset allocation model based on articles
written by Redhawk advisors.
59
All in or all out signal
This is a graphical representation of a tactical asset allocation model based on articles
written by Redhawk advisors.
60
Tactical Management Style
• How does tactical
management differ
from buy and hold
strategy?
• Do you feel that
tactical management
may be the future of
investing, as the
author suggested?
61
Red Money isn’t “bad” money…
62
Money Investing
• What is the value of Red Money
when planning for retirement?
63
The ABC Model of Investing
8.5 Do you see certain types of
annuities fitting in with Red, Yellow
or Green Money?
8.6 Which type(s) seems to fit with
Cash Assets? Fixed Principal
Assets? Risk Assets?
64
64
The Worst Bear Market
65
WHAT IF IT HAPPENS AGAIN?
“The way to make money is to buy
when blood is running in the
streets.”
John D. Rockefeller
“We simply attempt to be fearful
when others are greedy and to be
greedy with others are fearful.”
Warren Buffett
66
The Anatomy of a Bear
• Every 3 years you have a bear market.
• Every 8 years you have a significant bear
market.
• If you hold your money for 17 years you
won’t have a problem.
• The last bear started in 2000 and didn’t end
until 2009.
“The Anatomy of a Bear” Napier 2005
67
“Corrections” and “Bear Markets”
Global stock prices
(January 1, 1980—January 22, 2016)
Type of
Decline
Number
Ave. Return
Ave. Time
from Peak
to Trough
Correction
12
-13.7%
87 Days
Ave. Time
from
Trough to
Recovery
121 Days
Bear Market
7
-33.4%
373 Days
798 Days
Source: Vanguard, Markets & Economies 1/28/16
https://personal.vanguard.com/us/insights/article/market-correction-vanguard-perspective-012016
68
2007 through 2016
Hypothetical and/or actual historical returns contained in this presentation are for informational
purposes only and are not intended to be an offer, solicitation, or recommendation. Rates of return are
not guaranteed and are for illustrative purposes only. Past performance is no indication of future
results. The S&P 500 is not available for direct investment.
Chart: Retirement Analyzer Software 2017™
69
2007 through 2016
-$57,312
Hypothetical and/or actual historical returns contained in this presentation are for informational
purposes only and are not intended to be an offer, solicitation, or recommendation. Rates of return are
not guaranteed and are for illustrative purposes only. Past performance is no indication of future
results. The S&P 500 is not available for direct investment.
Chart: Retirement Analyzer Software 2017™
70
1969 through 1978
$-74,949
Hypothetical and/or actual historical returns contained in this presentation are for informational
purposes only and are not intended to be an offer, solicitation, or recommendation. Rates of return are
not guaranteed and are for illustrative purposes only. Past performance is no indication of future
results. The S&P 500 is not available for direct investment.
Chart: Retirement Analyzer Software 2016™
71
1969 through 1978
$-74,949
$120,196
Hypothetical and/or actual historical returns contained in this presentation are for informational
purposes only and are not intended to be an offer, solicitation, or recommendation. Rates of return are
not guaranteed and are for illustrative purposes only. Past performance is no indication of future
results. The S&P 500 is not available for direct investment.
Chart: Retirement Analyzer Software 2016™
72
2000 through 2009
$-74,949
Hypothetical and/or actual historical returns contained in this presentation are for informational
purposes only and are not intended to be an offer, solicitation, or recommendation. Rates of return are
not guaranteed and are for illustrative purposes only. Past performance is no indication of future
results. The S&P 500 is not available for direct investment.
Chart: Retirement Analyzer Software 2016™
73
2000 through 2009
If the next ten years saw a 10%, 20%, or
30% loss in the market
how would it affect
$191,684
your retirement?
Hypothetical and/or actual historical returns contained in this presentation are for informational
purposes only and are not intended to be an offer, solicitation, or recommendation. Rates of return are
not guaranteed and are for illustrative purposes only. Past performance is no indication of future
results. The S&P 500 is not available for direct investment.
Chart: Retirement Analyzer Software 2016™
74
What Do You Think?
9.4 Do you see the market over the
next decade more or less volatile than
the previous ten years?
9.5 Considering the ABC Model’s
performance in a Bear Market, is it
something that you would use in your
portfolio?
75
Next Week
Date______________
Time ____PM – _____PM
Read “Social Security Made Simple”
Also, if you haven’t already done so…
Complete Workbook, Financial Review Forms
and Your ABC Profile in the Appendix
76
CONTACT INFORMATION
Add your contact
information here.
77
ABC Retirement Planning
Thank you for attending!
78