Retirement Tools to Defuse the
Demographic Time Bomb
Tony Batman
Chairman & CEO
1st Global, Inc.
December 7, 2012
For Use with Prospective Wealth Management Firms Only – Not for Use with Clients
1st Global Capital Corp., Member FINRA/SIPC
Agenda
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•
•
•
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Overview & Foundation
Pre-Retirement Wealth Accumulation Risk
In-Retirement Sustainable Income Risk
Solutions
Practical Retirement Advice
– David Shill, GPP Wealth Management, LLC, Dallas
• Closing Thoughts & Key Takeaways
• Questions
2
3
Broad Market Environment
 Consumers still arithmetically poor
Source:
•
Yes, investable assets and retirement
plan assets now above 2007 levels
•
But … homes and small businesses still
below 2007 (hence home equity is the
#1 issue for most consumers’ psyches)
•
Consumers don’t realize financial
assets are way up. They still feel
stressed.
•
Bottom line … both household assets
and net worth still below 2007 levels
and probably will not change
consumer viewpoints given other
uncertainties
 Baby boomer retirement still the big driver
•
Liquidation will create more
millionaires (rollovers, house
downsizing and small business sales)
•
Issues include shrunk value of assets,
increasing life expectancies and lack of
inheritances
10/9/12 TD Ameritrade Email (Schweiss); 4/18/12 1st Global Presentation (Batman); 4/18/12 Berkshire Capital Securities Presentation (Cameron); 4/18/12 BrightScope Presentation
(Alfred); 4/18/12 FT Ventures Presentation (Cukier); 4/18/12 LPL Presentation (Casady); 4/17/12 Fidelity Investments Presentation (Young); 4/17/12 Jefferson National Presentation
(Caplan); 4/17/12 TD Ameritrade Presentation (Bradley); Tiburon Research & Analysis
4
Baby Boomers’ Pending Retirement will
Drive More Assets into the Investable
Assets Market
Consumer Households Assets
($ Trillions)
$7.7
$76.1
$22.0
$13.7
$30.5
Source:
10/14/12 Joyce Financial Management Email (Joyce); 6/30/12 Federal Reserve Flow of Funds Report; 3/31/12 Federal Reserve Flow of Funds Report; 12/31/11 Federal Reserve Flow of Funds
Report; 10/4/11 Triton Pacific Email (Michie); 9/16/11 Federal Reserve Flow of Funds Report; 4/8/11 Fidelity Investments Email (Graham); 4/7/11 TD Ameritrade Email (Schweiss); 12/31/10
Federal Reserve Flow of Funds Report; Tiburon Research & Analysis
5
The Share of the U.S. Population Over
the Age 65 is Increasing Rapidly
20%
Share of US Population Age 65 & Over
17%
15%
11%
8%
1950
Source:
12%
13%
9%
1960
1970
1980
1990
2000
2010
2020e
4/17/12 Fidelity Investments Email (Young) (US Department of Health & Human Resources; US Department of Commerce); Tiburon Research & Analysis
6
An Erosion of Confidence
82 percent of workers are not confident they will have enough
money for a comfortable retirement.
– A sharp increase from 73 percent in 2007
66 percent of workers are not confident they will have enough
money to take care of necessities (medical care, housing, food
and transportation) during retirement.
– Up from 52 percent in 2007
From the Employee Benefit Research Institute Study
Source: EBRI; Retirement Confidence Survey, 2008.
Information provided by John Hancock Funds.
7
61 percent of workers expect to receive income from a defined benefit
plan²… but only 20 percent of workers are covered by such plans.3
Most underfunded1
Frozen2
Won’t offer pension2
$32.2 billion total
1. Cerulli Associates Quantitative Update. “Retirement Markets.” 2007.
2. “While America Aged.”Roger Lowenstein, 2008.
3. U.S Bureau of Labor Statistics, 2008.
Information provided by John Hancock Funds.
8
Workers with Pension Coverage By
Type of Plan, 1983, 1995 and 2010
69%
70%
62%
56%
60%
50%
40%
30%
1983
29%
1995
26%
19%
20%
2010
12%
15% 13%
10%
0%
Defined benefit Only
Defined Contribution 401(k) plans - only
Both
Source: Center for Retirement Research, Boston College
9
Baby Boomers Have a
Growing Set of Financial Issues
 First baby boomers turned 65 in 2011
(birth years 1946 to 1964)
• 10,000 baby boomers turn 65
each day 2011-2029
• Many unprepared for retirement
(57% have less than $100,000)
 Average life expectancy reached 78
• And it is +10-20 years for those
who reach retirement age
Source:
 Inheritances not materializing
(~2% of baby boomers to receive
over $100,000)
 And now… the twin threats of
elder care and the kids moving
back in, plus potentially higher
taxes, and a possible reduction in
Social Security and/or Medicare
benefits
10/14/12 Pew Research Center Web Site; 10/14/12 Loring Ward Email (Potts) (Pew Research Center); 10/14/12 Joyce Financial Management Email (Joyce); 4/10/12 Fidelity
Investments Email (Graham); 10/4/11 Triton Pacific Email (Michie); 8/26/11 Joyce Financial Management Conversation (Joyce); 4/14/11 Edelman Financial Services Presentation
(Edelman); Tiburon Research & Analysis
10
2010 Incomes by Generation
Age
Generation
Number
(000s)
Mean
Median
Total
15-24
Millennials
26,014
$13,793
$9,808
$358,811,102,000
25-34
Late Millennials/Early Gen X
36,518
$36,426
$30,134
$1,330,204,668,000
35-44
Late Gen X
36,284
$48,725
$36,109
$1767,937,900,000
45-54
Late Boomers
40,274
$51,169
$36,515
$2,060,780,306,000
55-64
Early Boomers
35,275
$48,853
$32,744
$1,723,289,575,000
65-74
Greatest
22,635
$36,320
$22,705
$822,103,200,000
75+
Greatest / Silent
17,560
$25,714
$17,577
$446,322,520,000
Source: Center for Retirement Research, Boston College
11
The National Retirement Risk Index
1983-2009
60%
51%
50%
40%
36%
31%
31%
30%
1983
1986
1989
30%
38%
40%
43%
44%
2004
2007
38%
20%
10%
0%
1992
1995
1998
2001
2009
Source: Munnell, Golub-Sass, and Webb (2007); and Munnell calculations from the 2007 Survey of Consumer Financial (SCF).
12
Percentage of Households “At Risk” by
Cohort, 2009
56%
51%
60%
41%
50%
48%
40%
30%
20%
10%
0%
All
Early Boomers
Late Boomers
Gen Xers
Source: Munnell, Webb, and Golub-Sass (2009).
13
Life Expectancy at 65 for Men and
Women, 1983 and 2010
25
20
15
1983
2010
10
5
0
Men
Women
Source: Center for Retirement Research, Boston College
14
Percentage of Households Ready for
Retirement at Selected Ages, by Income
90%
82%
87% 88%
80%
70%
62%
55%
60%
Middle Income
38%
40%
30%
Low Income
47%
50%
31%
High Income
20%
20%
10%
0%
Age 62
Age 66
Age 70
Source: Center for Retirement Research, Boston College
15
Percent of Households “At Risk”
at Age 65 by Income Group
(2004, 2007 and 2009)
Income Group
2004
2007
2009
All
43%
44%
51%
Low income
53%
57%
60%
Middle income
40%
40%
47%
High income
36%
35%
42%
Source: Center for Retirement Research, Boston College
16
Percent of Households “At Risk” at Age
65 by Age Group
(2004, 2007and 2009)
Age Group
2004
2007
2009
All
43%
44%
51%
Early boomers
35%
37%
41%
Late boomers
44%
43%
48%
Gen Xers
49%
49%
56%
Source: Center for Retirement Research, Boston College
17
Number of Years Beyond Age 65 that
Households Must Work
to Attain Readiness
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
Zero additional
years
1 to 3 years
4 to 6 years
7+ years
Source: Center for Retirement Research, Boston College
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Eight Risks to Retirement
Source: Center for Retirement Research, Boston College
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Our Approach
• Discover client’s ideal vision of retirement.
• Craft a plan that addresses client’s unique risks and
helps them reach that vision.
• Maximize clients Social Security and pension income.
• Help you understand the potential benefits and
tradeoffs associated with their retirement income
plan.
• Instill more confidence that clients will have
sustainable income for the rest of their life.
22
Sustainable Income Solutions™
23
Clarifying the Retirement Vision
24
25
26
Scenario Presentation
27
28
29
30
Practical Retirement Advice
David Shill, GPP Wealth Management,
LLC, Dallas
31
32
Closing Thoughts &
Key Takeaways
33
34
Questions
35
36